E-mini futures contracts have been in the spotlight recently, as the trial of alleged British rogue trader, Narinder Singh Sarao, centres around whether he used these contracts to create the Flash Crash of 2010. But what exactly are e-mini futures, and why all the fuss?
E-mini futures are futures contracts based on the price performance of a variety of financial markets, including indexes, forex, metals and commodities. For example, taking a highly liquid stock index market, the S&P 500 version is only one fifth the size of standard S&P 500 futures contracts. Because of this, and because it represents the performance of the largest 500 US blue chip stocks, the S&P 500 e-mini futures contract has become the most widely traded futures contract in the world. It is small enough for private traders like Sarao to trade in large quantities, for example.
Because e-mini futures are small, and they are available around the clock, they also represent a highly liquid marketplace.
The first e-mini product was launched by the Chicago Mercantile Exchange back in 1997: the idea was to make futures trading more accessible for private investors and traders. Remember that CFDs are not available for US clients. This has helped to inject considerable liquidity into the US futures market.
E-Mini futures contracts for all major US indices
Contracts based on all the major US market indices are available on the CME’s Globex platform, apart from the Russell 2000, which has an e-mini on the ICE platform (Intercontinental Exchange). They are generally available around the clock, although there are short scheduled daily maintenance shutdowns.
E-mini futures can be traded on margin, another reason they are so popular, meaning that trades can be opened for as little as $500. However, these contracts are also used by larger players in the market, including funds.
Traders outside the US will also make use of e-minis. One of the main attractions for non-American traders stems from the fact that they are exchange-cleared: transactions are carried out on regulated US exchanges, and not over the counter products where the broker controls the pricing and liquidity.