How The E-Mini Changed The Game With Electronic Trading

In 1997, the wave of the future in trading was born. This was when E-mini exposed the market to a new breed of online trading, which paved the way for the current electronic market. Upon its debut over 20 years ago, very few understood just how much this mini version of the S&P 500 stock index futures contract would change the game with both equity and electronic trading.

A Revolutionary Creation

The E-mini contract was revolutionary at the time. It was created as a direct response to the Chicago Board of Trade (CBOT) acquiring the license to create a futures contract based on the Dow Jones Index, acontract geared to retail traders. This was a burst of sudden success for the CBOT at the time. Many were surprised that the CME did not acquire the contract, as it had the license for the S&P 500 for years.

From its earliest days, the E-mini S&P showed the world exactly what it could do, leading to its long-term popularity. Touted as the best contract ever made, the E-mini S&P show edit’s brilliance as being one-fifth the size of the standard S&P contract.This meant that traders could now either combine five E-mini contracts to equal one standard S&P contract, or divide one standard contract into five E-minis. Before E-mini was created, futures contrast consisted of only professional and commercial traders who could afford to fit the margin requirements.

A New Breed Of Traders

At the time of its debut, the bull market was larger than what some traders liked. This smaller size of the S&P meant that big contracts no longer had to be traded if one didn’t want to take the risk. It was a way to increase volume and still keep smaller traders in the market. Plus, it opened up futures to a whole new breed of online traders, proving that it was possible to have a product that was completely screen-traded. The success of E-mini S&P paved the way for all of the E-mini versions of the CMEGroup’s contracts and was embraced by other futures exchanges.   

Global Trading Capabilities

Not only did this revolutionary creation open futures trading to retail traders, it opened markets globally since all-electronic markets could be traded 24 hours a day, Monday thru Friday. This included the major markets of:

  • The US
  • Hong Kong
  • Japan
  • The UK

Instead of waiting for different markets to open, one could trade continually. This opened the exchange to a mix of market participants to help with liquidity. The more diverse the participants, the more vital and dynamic the trade. Though the smaller contract size appeals to retailers, the CFTC’s Commitments of Traders data shows a mix of asset managers, dealers, and leverage accounts that use the E-mini S&P. With benefits such as better granularity for speculation and hedging, faster fills, and screen-trading ability, it’s easy to see why the E-mini S&P still reigns supreme.

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