Transitioning E-mini Russell 2000® Positions from ICE to CME

On July 10, 2017, CME Group launched the E-mini Russell 2000® Index futures and options suite. CME has the exclusive rights to list futures and options on the index; however, the futures products are currently available at CME as well as ICE for a period of time to facilitate the transition of open interest between the exchanges.1

Please note, the positions will not be moved to CME without client action.


Three ways to transition Russell 2000 futures from ICE to CME:

1. Using BTIC and TIC functionality

By using BTIC (Basis Trade at Index Close) functionality at CME and TIC (Trade at Index Close) functionality at ICE a client can transition its position in the Russell 2000 futures from one exchange to another. Both of these methods allow a client to trade at a “known basis” to the official cash index close.

One way to minimize slippage when moving contracts between the two exchanges is to do so via negotiating a BTIC block transaction on CME and a TIC block transaction on ICE.   The basis quoted in the BTIC and TIC block indications will likely be very similar, if not the same, for contracts with a common maturity date.  Additionally, please note that CME offers competitive trading on CME Globex with BTIC pricing.

View BTIC and Block Liquidity Providers

2. Using the DEC-MAR futures roll

A client that is currently long Russell 2000 futures at ICE can use the “roll” to transition their position to CME contracts. This is most easily done by trading the roll in the CME DEC-MAR calendar spread and holding the existing contract at ICE until expiration.

The resulting set of December futures, long at ICE and short at CME, would be equal in size and opposite in direction and will both expire against the same index price on the date of the December futures expiration (December 15, 2017). There is no price risk at expiration and the client may let them expire in an offsetting fashion. Once the December contracts have expired the client’s remaining position is the long March futures which would be in the CME contract.

Note the same logic can be applied if the client is currently short Russell 2000 futures on ICE. In this case, one would buy the December contract at CME whilst selling the March contract with CME.

To view the DEC-MAR E-mini Russell 2000 Calendar Spreads please use the following ticker symbols:

  • Bloomberg: RTYZ7H7 Index
  • Thomson Reuters: RTYZ7-H7
  • DTN: @RTYZ17-@RTYH17

3. Using block functionality at CME and ICE

A client who is long Russell 2000 futures at ICE and wishes to transition to CME may enter two separate block trades – one at each exchange. This may be done providing the size of each leg is at least 40 contracts (the current minimum block size at each exchange). Please note that each block trade must adhere to each respective exchange’s rules and regulations concerning block trades.


Cost advantages and incentives of transitioning to CME early

1. Fee Waivers (through September 30, 2017)2

  • BTIC fees on CME Globex and Block trades
  • Calendar spreads
  • Outright block trades and Exchange for Physicals (EFPs)

2. Margin offsets

Clients with E-mini Russell 2000 Index future positions at CME may experience margin offsets of up to 80%3 between the E-mini Russell 2000 index futures and other CME Equity Index futures, such as E-mini S&P 500, E-mini NASDAQ 100 and E-mini S&P MidCap 400, among others.

Margin Benefits at CME

E-mini Russell 2000 Margin Benefits at CME

The initial margin estimate for the E-mini Russell 2000 Index futures (RTY) outright contract is approximately $2,750 (~4% of the contract notional value) and $80 for the calendar spread3. Clients may achieve even greater capital efficiencies through margin credits  between RTY and CME’s broad-based index futures contracts as depicted in the table below. This means that any offsetting combination of the below products at their appropriate ratio may receive a certain margin credit , beginning with the pair with the highest credit ratio first.

For example, three long (short) RTY futures contracts held against two short (long) E-mini S&P 500 futures contract (ES) may receive a credit as high as 75%.

Leg 1 vs. Leg 2 Ratio Margin Credit
RTY ES 3:2 75%
RTY NQ 3:2 65%
RTY YM 3:2 70%
RTY ME 4:1 80%
RTY N1 3:2 65%
RTY NK 3:2 65%
RTY RS1 5:6 75%
RTY RSG 5:6 55%
RTY RSV 3:4 70%
 
Example:

Suppose an investor holds three long (short) Russell 2000 futures contracts and two short (long) E-mini S&P 500 futures contract at CME. The tables below depict the margin for holding the Russell 2000 positions at ICE (Scenario 1) compared to holding both positions at CME (Scenario 2).

Scenario 1

Contract

Exchange

Initial Margin per Leg

Russell 2000 Futures

ICE

$2,200

E-mini S&P 500 Futures

CME

$4,500

 

Offset

 

N/A

Total Margin

 

$15,600

 

Scenario 2

Contract

Exchange

Initial Margin per Leg

E-mini Russell 2000 Futures

CME

$2,750

E-mini S&P 500 Futures

CME

$4,500

 

Offset

 

75%

Total Margin w/Offset

 

$4,313


Product Trading Codes

E-mini Russell 2000® Index futures and options

Futures Contracts

Underlying Index (Bloomberg)

CME Globex

Bloomberg Front Month

Thomson Reuters Front Month

Outright Futures

E-mini Russell 2000 Index Futures

RTY Index

RTY

RTYA Index

RTYc1

E-mini Russell 2000 Growth Index Futures

RUO Index

R2G

RGLA Index

R2Gc1

E-mini Russell 2000 Value Index Futures

RUJ Index

R2V

RVLA Index

R2Vc1

Calendar Spreads (Sep:Dec)
E-mini Russell 2000 Index Futures RTY Index RTYU7 - RTYZ7 RTYU7Z7 Index RTYU7-Z7
E-mini Russell 2000 Growth Index Futures RUO Index R2GU7 - R2GZ7 RGLU7Z7 Index R2GU7-Z7
E-mini Russell 2000 Value Index Futures RUJ Index R2VU7 - R2VZ7 RVLU7Z7 Index R2VU7-Z7

BTIC Futures 

BTIC E-mini Russell 2000 Index Futures

RTY Index

RLT

RLBA Index

RTLc1

BTIC E-mini Russell 2000 Growth Index Futures

RUO Index

2GT

RGRA Index

RTGc1

BTIC E-mini Russell 2000 Value Index Futures

RUJ Index

2VT

RVRA Index

RTVc1

Options on Futures Contracts

Underlying Index (Bloomberg)

CME Globex

Bloomberg Options Monitor

Thomson Reuters Chain

Quarterly Expiration

RTY Index

RTO

RTYA Index OMON

0#1RTY+

End-of-Month Expiration

RTY Index

RTM

RMEA Index OMON

0#1RMX+

Weekly Expiration

RTY Index

R1E, R2E, R3E, R4E

RUWA Index OMON

0#1RTYW+

The minimum block trade thresholds for all Russell 2000 futures and options is 40 contracts. All contracts denominated in USD.


1.ICE will no longer be legally capable of listing new expirations as of July 1, 2017

2. This applies to Russell 1000 Futures, Russell 1000 Value Futures and Russell 1000 Growth Futures as well as Russell 2000 Futures, Russell 2000 Growth Futures and Russell 2000 Value Futures (subject to change in the future).

3. As of September 12, 2017 and subject to change. Generally speaking, CME uses a Historical Value-at-Risk (VaR) methodology called SPAN to ensure that margins are set to cover 99 percent of potential price moves. CME considers several factors to compute the gains and losses a portfolio would incur under different market conditions: Historical price changes at the contract level, seasonality, correlations between products.

Other pertinent factors may also impact the performance bond requirements. CME strives to cover 99 percent of price moves over the course of a calendar year when setting margins for all contracts and portfolios. During periods of high volatility, we will reevaluate how well our margins did relative to the 99 percent target coverage and reevaluate for increases (or decreases after periods of low volatility).

More information can be found here: Margins FAQ and SPAN methodology.

Please contact the CME Risk Team for additional questions.

Clearing.riskmanagement@cmegroup.com

+1 312 648 3888

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