Friday Fun Fact: The Origins of E-mini S&P 500 Futures

In the mid-to-late 1990s, the U.S. stock market was on a 15-year secular bull market that started in 1982. By the time 1997 was ushered in, the S&P 500 Index easily surpassed the 1,000 level.

At that time, the multiplier for the standard pit-traded S&P 500 futures was 500, meaning the contract notional value exceeded $500,000. The performance bond margin requirement exceeded $25,000 and was therefore beyond the reach of most traders. As a result, CME decided to launch a smaller, bite- sized, more retail-friendly version of the S&P 500: the E-mini S&P 500.

Given that electronic trading had taken hold in most other exchanges around the globe and that CME Globex, CME’s electronic trading system, was gaining attention and growing volume, it was decided that the E-mini S&P 500 would trade exclusively via CME Globex. The product launched in September 1997 and the product was an instant success; trading over 7,000 contracts on its first day. Three years later, it was trading 80,000 a day, and today, it trades nearly 2,000,000 contracts a day.

In fact, the E-mini S&P 500 futures contract trades more dollar volume each day than all 7,000 ETFs listed around the world1.  The liquidity in the contract is unparalleled and investors from the retail and active trader side, as well as pension funds and money managers, enjoy the many benefits of this contract.

Following the success of the E-mini S&P 500, CME has also launched E-mini versions of the Nasdaq 100, the S&P MidCap 400 and the Russell 2000 contracts. All of them, became successful and liquid contracts just like the S&P 500.

 

1 Exchange Traded Funds and E-mini Stock Index  Futures by David Lerman  page 133-137

About the Author

David Lerman, the Senior Director of Education at CME Group, gives seminars and workshops to retail and institutional audiences focusing on risk management and trading using Equity Index futures and options.

Mr. Lerman is the author of Exchange Traded Funds and E-mini Stock Index Futures (published by John Wiley and Sons).

Prior to joining the CME in 1988, Mr. Lerman traded futures and options on U.S. Treasury Bonds at the Chicago Board of Trade and was Senior Portfolio Manager at Zavanelli Portfolio Research. Mr. Lerman taught investment management at Harper College and has lectured at the Northwestern University Kellogg Graduate School of Management.