E-mini S&P

E-mini S&P, often abbreviated to "E-mini" (despite the existence of many other E-mini contracts) and designated by the commodity ticker symbol ES, is a stock market index futures contract traded on the Chicago Mercantile Exchange. The notional value of one contract is 50 times the value of the S&P 500 stock index; thus, for example, on June 20, 2018, the S&P 500 cash index closed at 2,767.32, making each E-mini contract a $138,366 bet.

History and structure

The contract was introduced by the CME on September 9, 1997, after the value of the existing S&P contract (then valued at 500 times the index, or over $500,000 at the time) became too large for many small traders. The E-mini quickly became the most popular equity index futures contract in the world. The original ("big") S&P contract was subsequently split 2:1, bringing it to 250 times the index. Hedge funds often prefer trading the E-mini over the big S&P since the older ("big") contract still uses the open outcry pit trading method, with its inherent delays, versus the all-electronic Globex system for the E-mini. The current average daily implied volume for the E-mini is over $100 billion, far exceeding the combined traded dollar volume of the underlying 500 stocks.[1][2][3]

Following the success of this product, the exchange introduced the E-mini NASDAQ-100 contract, at one fifth of the original NASDAQ-100 index-based contract, and many other "mini" products geared primarily towards small speculators, as opposed to large hedgers.

In June 2005 the exchange introduced a yet smaller product based on the S&P, with the underlying asset being 100 shares of the highly-popular SPDR exchange-traded fund. However, due to the different regulatory requirements, the performance bond (or "margin") required for one such contract is almost as high as that for the five times larger E-mini contract. The product never became popular, with volumes rarely exceeding 10 contracts a day.

The E-mini contract trades from Sunday to Friday 5:00pm – 4:00pm (Chicago Time/CT) with a 15-minute trading halt from 3:15pm to 3:30pm CT. From 4:00pm to 5:00pm is a daily maintenance period.

Outsized trades

According to US government investigations, the sale of 75,000 E-mini contracts by a single trader was the trigger to cause the 2010 Flash Crash.[4][5][6] According to the SEC/CFTC report, the firm "accidentally instructed its trading program to dump them all in a series of sell orders over 20 minutes, rather than spreading the sell orders out over a much longer time period".[7] This claim was later addressed by the Chicago Mercantile Exchange, not mentioning any "accident" and implying the program was a methodical hedge whose execution generated "less than 9% of the volume during the" twenty minutes.[8][9]

On December 7, 2016, multiple buyers purchased around 16,000 E-mini S&P 500, in what was described as a series of stop orders triggered by a single contract trading at 2225.00.[10] The contracts traded as stops, traded "all ... at the same nanosecond", were valued at $1.8 billion. The sequence of trades at new highs was prelude to a sharp market rally for the balance of the day and the two succeeding days. It was the biggest E-mini trade by more than a factor of two in 2016 and attracted comparison to the 2010 flash-crash trade.[7]

See also

References
  1. CME Group - daily trading volumes, cmegroup.com.
  2. NYSE - total daily trading dollar volume, nyxdata.com.
  3. NASDAQ total daily trading dollar volume, nasdaqtrader.com.
  4. Der Spiegel (October 1, 2010). "Einzelner Händler löste Wall-Street-Crash aus" (in German). Retrieved October 2, 2010.
  5. Report of the Staffs of the CFTC and SEC to the Joint Advisory Committee on Emerging Regulatory Issues sec.gov, May 18, 2010.
  6. Findings Regarding the Market Events of May 6, 2010, sec.gov, September 30, 2010.
  7. Osipovich, Alexander, "How the Biggest E-mini Futures Trade of 2016 Sent the Market Soaring" (subscription), The Wall Street Journal, December 12, 2016. Retrieved 2016-12-12.
  8. CME Group Statement on the Joint CFTC/SEC Report Regarding the Events of May 6, cmegroup.com, October 1, 2010.
  9. Leinweber, D. (2011), Journal of Portfolio Management, Spring, pp.1–2
  10. The Wall Street Journal (December 27, 2016). "Multiple Buyers, Not One, Influenced Most Active E-mini Move of 2016".
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