New Forex E-Micro, 3-Year T-Note and Mini-VIX Futures Contracts Debut

By Kristina Zurla Landgraf ISSUE 803 | March 2009

Some interesting new markets will soon be available for you to trade as a Lind-Waldock client. CME Group announced plans to launch new Forex E-Micro and 3-year Treasury note futures contracts before the end of this month, while the CBOE Futures Exchange LLC (CFE) began offering trading in mini-VIX futures on Monday, March 2, 2009.

Lind-Waldock clients can contact their Trade Desk or Lind Plus market strategist for information on when these new products will be available for you to trade, including appropriate symbols.

Forex E-Micro Futures
Forex E-Mirco contracts will be available before the end of the first quarter, but no official launch date has yet been given. These contracts are priced at one-tenth the size of the existing CME currency futures contracts and provide a cost-effective way to access the dynamic foreign exchange market with the security, transparency and liquidity of CME Group. These contracts are listed with, and subject to, the rules and regulations of CME.

"Our new Forex E-micro futures contracts provide the opportunity for a broader universe of customers to mitigate their counterparty risk by trading FX in CME's $100 billion-a-day global FX liquidity pool," said Derek Sammann, CME Group Managing Director, Global Head of FX Products.

"Active individual traders looking to participate in the global FX market, or small businesses seeking a cost-effective hedging tool for their FX risk, can choose Forex E-micro futures as a versatile and accessible new resource to manage their exposure. And they can do this with the full investor safeguards of operating in CME Group's regulated environment,” he said.

The new contracts will be exclusively traded on the CME Globex® electronic trading platform, which also offers the security of centralized clearing and guaranteed counterparty credit. The Forex E-Micro contracts will be quoted in interbank or "over the counter" (OTC) terms, making it easy for customers to integrate them into their systems and portfolios. Contracts will be launched in the following six currency pairs: EUR/USD, GBP/USD, AUD/USD, USD/JPY, USD/CHF and USD/CAD. 

All Forex E-micro contracts will be cash-settled and EUR/USD, GBP/USD and AUD/USD contracts will be fully fungible with CME Group's full-sized FX contracts. Margins will be scaled down in proportion with the full-sized versions at roughly one-tenth of the full cost. See full Forex E-Micro contract specifications at www.cmegroup.com/forexmicros.

Three-Year Treasury Note Futures
CME Group also plans to offer trading in new 3-year Treasury note futures starting on Monday, March 23, 2009. In reaction to the economic and financial crises of 2008, the U.S. Congress has approved various relief and stimulus plans that will drive U.S. Treasury debt issuance to historic levels in 2009. To assist in the funding of these various programs, the U.S. Treasury Department began to re-issue 3-year Treasury notes on a monthly basis in November 2008. Industry estimates are that the Treasury will auction 3-year notes in significantly large issuance—between $30 and $35 billion on a monthly basis, or $360 and $420 billion annually.

The features of CME Group’s 3-year note futures complement the design of the current suite of Treasury futures contracts at the exchange. The notional contract size is $200,000, the minimum tick is one-quarter of one thirty-second ($15.625), and it trades on the March quarterly cycle. These contracts will trade both open outcry and on the CME Globex electronic platform. View full 3-Year T-Note Futures Contract Specifications.

Mini-VIX Futures
The CFE’s new mini-VIX futures are geared toward the smaller investor, priced at one-tenth the size of the standard CBOE VIX futures contract. The CBOE Volatility Index (VIX), based on real-time S&P 500 Index (SPX) options listed on the Chicago Board Options Exchange, reflects investors’ consensus view of future expected market volatility of the S&P 500 index.

"We expect that the mini-VIX futures contract will attract the attention of sophisticated investors and institutions who are looking for a smaller-scale play on implied volatility that's independent of the direction and level of stock prices, or a way to hedge equity returns, diversify portfolios, and spread implied against realized volatility," said CFE Managing Director Andrew Lowenthal. "As seen over the last year, the VIX has experienced some dramatic spikes, and a smaller VIX futures contract with proportionately lower margins may be more manageable for a wider variety of users," he said.

The new cash-settled CBOE mini-VIX futures initially will list March, April and May serial futures months, which coincide with CBOE's S&P 500 nearby options months. The new, smaller contract features a $100 multiplier versus $1,000 for the larger VIX futures contract, with a minimum price movement (tick) of $5 per contract. More information and complete contract specifications can be found at: http://cfe.cboe.com/Products/Products_VM.aspx

Kristina Zurla Landgraf is editor of Lind eWire. She can be reached at editor@lind-waldock.com.

Futures trading involves substantial risk of loss and is not suitable for all investors.

Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Lind-Waldock believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.

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