Risk management for a time of uncertainty

Japan ETF Conference, April 2023
Minah Kim
Senior Director, Equity Index & Cryptocurrency Products
CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

2

Disclaimer
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3

Disclaimer
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3

Index Choice Matters

CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

Equity Index Dispersion 2021

Source: Bloomberg

S&P 500
DJIA
S&P Midcap 400
S&P Smallcap 600
Nasdaq-100
Russell 2000

2021
26.89%
18.73%
23.21%
25.27%
26.63%
13.70%CME GROUP PUBLIC

Q1
5.77%
7.76%
13.12%
17.91%
1.58%
12.44%

Q2
8.17%
4.61%
3.33%
4.21%
11.18%
4.05%

Q3
0.23%
-1.91%-2.06%-3.14%
0.93%-4.60%© 2023 CME Group. All rights reserved.

Q4
10.65%
7.37%
7.63%
5.26%
11.10%
1.86%
5

Equity Index Dispersion 2022

Source: Bloomberg

S&P 500
DJIA
S&P Midcap 400
S&P Smallcap 600
Nasdaq-100
Russell 2000

2022
-19.44%-8.78%-14.48%-17.42%-32.97%-21.56%
CME GROUP PUBLIC

Q1-4.95%-4.57%-5.22%-5.93%-9.08%-7.80%

Q2-16.45%-11.26%-15.77%-14.45%-22.47%-17.49%Q3-5.28%-6.66%-2.88%-5.59%-4.63%-2.53%© 2023 CME Group. All rights reserved.

Q4
7.08%
15.39%
10.30%
8.69%-0.29%
5.80%
6

7

E-mini S&P 500 Select Sectors Dispersion
2022 saw Energy up as much as 59%, while other sectors performed negatively throughout the year

Source: Bloomberg

CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

7

8

Sector Futures Growth
Sector Futures’ liquidity has grown significantly over the last few years• Around-the-clock access to 19 Sectors• E-mini S&P 500 Select Sector 2023 YTD ADV was a record 20.4K contracts (+11% vs. 2022)• Now trading, 6 new E-mini Sector index futures: S&P Select Industry on Regional Banks, Insurance,
Biotechnology, Oil & Gas Exploration and Production, Retail, and the PHLX Semiconductor Sector Index

250

20

200

15

150

10

100

5

50

0

0
2011

2012

2013

2014

2015

2016

2017

ADV

2018

2019

2020

2021

2022

ADOI

2023

Average Open Interest(contracts)

25

Thousands

Thousands

ADV(contracts)

E-mini S&P 500 Select Sector Futures Annual ADV and OI

Data source: CME Group

CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

8

E-mini S&P 500 ESG Futures Performance Since Launch
ESG Futures are proving to be an additive product to the CME equity futures ecosystem• In 2022, ADV averaged over 1.6K contracts (+48%vs. 2021) with a record volume day of 18,551
contracts on March 14th ($3.2B in notional)

1,800

16,000• 2022 OI averaged over 13.4K (over $2.4B notional)

1,600

14,0001,400

12,000

1,200
10,000
1,000
8,000
800
6,000

Average Daily Open Interest• High correlation with other ESG based indices(typically 99.5%+) has meant clients benchmarked
to those indices are likely adopting this product for
liquidity characteristics.

Average Daily Volume• A diverse set of clients are accessing ESG futures
via a few different transaction types: Outrights(72%), BTIC (10%), and Block (18%)

E-mini S&P 500 ESG futures annual ADV and OI
since launch

600
4,000

400

2,000

200
-

2019

2020

CME GROUP PUBLIC

2021

2022

© 2023 CME Group. All rights reserved.

9

CME Group Equity Index Products
Equity Index Quarterly ADV and Open Interest
9.0

12.0

8.0
10.0

8.0

5.0
6.0
4.0
3.0

4.0

2.0
2.0
1.0

2012

2013

2014

2015

2016

Futures ADV

2017

2018

Options ADV

2019

2020

2021

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q1

Q2

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

0.0

Q2

0.0

Q1

ADV (Millions)

6.0

Average Open Interest (Millions)

7.0

2022

Average OI

CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

10

E-mini Futures Non-US hours Liquidity
2022 Non-US hours ADV was 507K, +21% vs. 2022
CME E-mini Futures ADV during Non-US Hours
700,000
600,000

ADV

500,000
400,000
300,000
200,000

100,000
2014

2015

2016

2017

2018

2019

2020

2021

E-mini Nasdaq-100 Non-US Hours ADV

E-mini Russell 2000 Non-US Hours ADV

E-mini S&P 500 Non-US Hours ADV

E-mini Dow Non-US Hours ADV

CME GROUP PUBLIC

2022

Data source: CME Group© 2023 CME Group. All rights reserved.

11

E-mini Futures Trading Highlights•

2022 futures ADV was a record 2.0M (+32% YoY), 705K (+53% YoY) and 241K (+45% YoY) for E-mini S&P 500,
Nasdaq-100 & Russell 2000•

2022 E-mini Nasdaq-100 & Russell 2000 Non-US hours1 ADV was are record 138K (+32% YoY) & 29K (+19% YoY)

E-mini Nasdaq-100

E-mini S&P 500
Non-US
Hours
15%

Non-US
Hours
20%
291K
ADV

E-mini Russell 2000
Non-US
Hours
12%
29K
ADV

138K
138K
ADV
ADV

212K
ADV

567K
ADV
1.7M
ADV

Regular Trading Hours

Non-US Hours

Regular Trading Hours

Non-US Hours

Regular Trading Hours

Non-US Hours
Data source: CME Group

1 Non-U.S. Trading Hours are 5:00 p.m. – 8:00 a.m. CT / 7:00 a.m. – 10:00 p.m. JST

CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

12

Micro E-mini Futures• CME Group launched Micro E-mini futures on our major indices in May 2019, 2022 ADV was a record 3.1M (+64% YoY)
• Over 1.9B contracts traded since launch – 26% of volume transacted outside the U.S. and 21% of volume trading
before the U.S. cash open in 2022

Millions

Micro E-mini Futures ADV by Quarter
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Q2-19

Q3-19

Q4-19

Q1-20

Micro E-mini Russell 2000

Q2-20

Q3-20

Q4-20

Micro E-mini S&P 500

Q1-21

Q2-21

Q3-21

Q4-21

Q1-22

Micro E-mini Nasdaq-100

Q2-22

Q3-22

Q4-22

Micro E-mini Dow
Source: CME Group

CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

13

Equity Tools for Changing Markets

CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

Derived Block Trades for Sectors
Providing greater flexibility to source intraday liquidity•

Derived Block Trades by Quarter

A block trade in which the price and quantity of the
trade depends on one or a series of hedging
transactions in an eligible related market e.g. (stocks
or ETFs).
The execution methodology of the hedging transaction
and the methodology for the derivation of the price ofthe futures trade, will be agreed by the twocounterparties prior to the execution of the hedging
transaction•

Since eligibility, nearly 200 derived block transactions
have occurred for a total volume traded of 131K•

$9.5B has transacted across 14 different Equity Index
Sector futures products in 2022

100
90
80

Count of Trades

•

70
60
50
40
30
20
10
0
Q2-22

Q3-22

Q4-22
Data source: CME Group

CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

15

Growth in Exchange for Related Positions (EFRPs)
Heavy uptake into our EFRP mechanism due to capital and operational efficiencies• An Exchange For Related Position (EFRP) allows afuture to be simultaneously exchanged vs. a related
product that is highly correlated.

Equity Index Futures EFR & EFP ADV by Year
25,000• This could be a cash basket, an ETF or an OTC
instrument.

• This can cover both futures and option products• There is no minimum threshold requirement for thetransaction

ADV (contracts)• Is privately negotiated between 2 parties

20,00015,00010,0005,000• Improved Operational Efficiency: Avoid having multiple
line items in your portfolio via synthetics0• Improved Capital Efficiency: Optimize capital by moving
between ETFs and Futures without price risk

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

EFP ADVEFR ADVData source: CME Group

CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

16

BTIC (Basis Trade at Index Close)
Basis Trade at Index Close (BTIC) was introduced on U.S. major indices in Q4-2015•

Over 61M contracts traded ($10T notional) since the Nov. 2015 launch, 2022 ADV was $24.4B•

Q1-2023 ADV of 42.8K contracts represents 37.5% of the Daily Market on Close (MOC).

•

BTIC has represented 38% of the 2022 Month-End MOC trading flows on the primary cash venues•

Stock volumes have significantly shifted towards the cash index close
Positioning BTIC as an efficient alternative to MOC orders for buyside managers rebalancing their portfolios at month-end

Average MOC Notional Volume by year

BTIC on E-mini S&P 500 Futures$30

Billions

Billions

MOC Auctions at NYSE and NASDAQ for index constituentson the S&P 500 traded over $28.3B notional daily in 2022 YTD

$25

$10

40%

$9

35%

$8

30%

$7

$20
$15
$10

$6

25%

$5

20%

$4

15%

$3

10%

$2
$5

5%

$1
$0

$0
2016

2017

2018

2019

Average Notional Volume

2020

2021

2022

0%
2016

2017

2018

2019

BTIC ADV (Notional)

2020

2021

2022

% of MOC
Data source: CME Group

CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

17

TACO (Trade at Cash Open)30,000Month-End BTIC Volume
BTIC Volume% of MOC% of MOC

80%
70%

25,00060%
20,00050%

15,00040%
30%

10,000

20%

5,000

10%
11/3…
8/31…
5/31…
2/28…
11/3…
8/31…
5/28…
2/26…
11/3…
8/31…
5/29…
2/28…
11/2…
8/30…
5/31…
2/28…
11/3…
8/31…
5/31…
2/28…
11/3…
8/31…
5/31…
2/28…
11/3…
8/31…
5/31…
2/29…
11/3…

0%

TACO at 3rd Friday Expiration by Quarter
30,000Total Vol*

15%

MOO

20,00010%

10,0005%-

0%*Sum of 3rd Friday's of each quarter
CME GROUP PUBLIC

Percentage of Market on
Open• BTIC+ and TACO+• Launched in Oct 2019
• Introduces T+ trading to the futures market• Allows market participants to execute a BTIC or
TACO trade days in advance on E-mini S&P 500

Notional ($M)

Q3-18
Q4-18
Q1-19
Q2-19
Q3-19
Q4-19
Q1-20
Q2-20
Q3-20
Q4-20
Q1-21
Q2-21
Q3-21
Q4-21
Q1-22
Q2-22
Q3-22
Q4-22

• TACO (Trade at Cash Open)• Allows participants to execute a basis trade relative tothe day’s official cash index opening level – before theunderlying market opens• Available on E-mini S&P 500, Nasdaq-100, andRussell 2000
• Strong volumes on the 3rd Friday of the month, withthat being the expiration of SPX options

Data source: CME Group© 2021 CME Group. All rights reserved.

18Liquidity matters

CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

Asian Hour Liquidity – E-mini S&P 500 Futures
E-mini S&P 500 futures trade over $25 billion per day during APAC trading hours, making it comparable to the mostliquid APAC index futures.
Equity Index Futures Average Daily Turnover ($B) During Asian trading Hours FY 2022
E-mini S&P 500

Kospi 200
Hang Seng
Mini Nikkei 225

Nikkei225 (OSE)
Nifty (NSE)
MSCI Taiwan

HSCEI
$-

$5

$10

$15

$20

$25

• E-mini S&P 500 futures volume is based on 9:00 AM – 5:00 PM Tokyo (8:00 AM-4:00 PM HKT)
• All others are based on local trading hours

Billions$30

Source: CME Group, Bloomberg© 2019 CME Group. All rights reserved.

20

Key trading surges during non-U.S. trading hours
During the Non-US hours trading session for the events below, E-mini S&P 500 futures outperformed•

Start of Russian-Ukraine War, E-mini S&P 500 futures traded $112B notional value, over 9x the liquidity traded via S&P 500-based ETFs andcash constituents.

•

For the 2020 U.S. election, E-mini S&P 500 futures traded $173B notional value, over 25x the liquidity traded via S&P 500-based ETFs andcash constituents.
During the non-US Hours trading session at the start of the pandemic (week of Feb. 24-28, 2020) CME S&P 500 futures traded on average$178B notional value per day, exceeding the liquidity traded in the S&P 500-based ETFs and cash constituents.

Billions

Trading Surges during Non-US Hours

Total Value Traded

•

$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$-

Multiplier of S&P 500 futures vs. Adjacent Market Activity

Russian-Ukraine War
E-mini S&P 500 Futures

2020 U.S. Election

Top 3 S&P 500 ETFs

ETFs

Cash
Constituents

Russian-Ukraine War

12x

33x

2020 U.S. Election

30x

149x

Start of Pandemic

8x

Start of Pandemic

S&P 500 constituents

Source: CME Group, Bloomberg
1 Non-U.S. Trading Hours are 5:00 p.m. – 8:00 a.m. CT / 6:00 a.m. – 9:00 p.m. SG & HKT

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21

Asian Hour Liquidity
Actionable Liquidity Around the Clock
E-mini S&P 500 Futures

E-mini Dow ($5) Futures•

2023 YTD E-mini S&P 500 futures Non-US hours ADV
is 312K contracts•

2023 YTD E-mini Dow ($5) futures Non-US hour ADV is
40K contracts•

Non-US hours volume in 2023 YTD has averaged 15%
of total volume•

Non-US hours volume in 2023 averaged 20%

400

20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%

ADV

350
300
250
200
150
100
50
0
2017

2018

E-mini Dow ($5) Futures during Non-US hours

2019

2020

2021

2022

Thousands

Thousands

E-mini S&P 500 Futures during Non-US hours

ADV

80

35%

70

30%

60

25%

50

20%

40

15%

30
20

10%

10

5%

0

0%

2017

2018

2019

2020

2021

2022

2023

2023
Data source: CME Group

Source: CME Group, as of Mar 24, 2023
CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

Asian Hour Liquidity
Actionable Liquidity Around the Clock
E-mini Nasdaq-100 Futures

E-mini Russell 2000 Futures•

2023 YTD Non-US hour ADV is 128K contracts•

Global 2023 YTD ADV is 694K contracts•

Non-US hours volume in 2023 YTD has averaged 18%
of overall volume•2023 YTD E-mini Russell 2000 futures Non-US hour ADV
is 31K•

Non-US hours volume 2022 YTD has averaged 13%

160

E-mini Russell 2000 Futures during Non-US hours
25%

ADV

140
20%

120
100

15%

80
10%

60
40

5%

20
0

0%
2017

2018

2019

2020

2021

2022

2023

Thousands

Thousands

E-mini Nasdaq Futures during Non-US hours

ADV

35

14%

30

12%

25

10%

20

8%

15

6%

10

4%

5

2%

0

0%
2017

2018

2019

2020

2021

2022

2023

Data source: CME Group
Source: CME Group, as of Mar 24, 2023
CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

E-mini S&P 500 Options - Enhancements and Asian Hours Growth Story
Equity options traded a record ADV of 1.2M in 2022
• E-mini S&P 500 options ADV was a record 1.15M (+63% vs. 2021)• E-mini S&P 500 options non-US hours ADV was a record 185K (+51% vs. 2021)
E-mini S&P 500 Options Annual ADV

E-mini S&P 500 Options during Non-US hours

1,400,000

ADV (contracts)

1,200,000

200,000
1,145,011

187,921

180,000
160,000

1,000,000

140,000
120,000

800,000

100,000
600,000

80,00060,000400,000

40,000200,000

20,000-2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Data source: CME Group

CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

24

E-mini S&P 500 Options Blocks
Launched June 2021, E-mini S&P 500 Options have traded over 24.6M contracts•

100,000

Delta can be covered with E-mini S&P 500 futures (deltaneutral) and centrally cleared with margin offset benefits
between futures vs. options
Minimum Block Quantity of 250 contracts per options leg
with no minimum threshold for delta leg using E-mini S&P
500 futures•

Customers can monitor block trade activity of E-mini S&P
500 options throughout the trading day.

•E-mini Nasdaq-100 (NQ) options: NQ options became
block eligible in January 2022, with a minimum blockthreshold of 60 contracts. Nearly 15.5K contracts have
traded since launch.

90,00080,00070,00060,00050,00040,00030,00020,00010,000-Jun 21
Jul 21Aug 21
Sep 21
Oct 21
Nov 21
Dec 21
Jan 22
Feb 22
Mar 22
Apr 22
May 22Jun 22
Jul 22Aug 22
Sep 22
Oct 22
Nov 22
Dec 22•E-mini S&P 500 Options Block Monthly ADV

Negotiate and trade large size without slippage or breakuprisk

ADV (contracts)•

Data source: CME Group

CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

25

Equity Tools under UMR environment

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7

AIR S&P 500 Total Return Futures
Launched on September 21, 2020•

New Adjusted Interest Rate Total Return Futures(AIR TRFs) on the S&P 500 Index are designed togive you total return exposure with an overnight
floating rate built in.

•

The enhanced contract design provides similar
economics to an equity index total return swap withthe margin efficiency of listed futures.

• Available to trade via Globex or via Blocks- Seen strong Globex markets from anearly stage – often displaying 500
contracts a side with a spread of 6-7
basis points.

5,000

ADV

4,000

300
ADV

3,000

Avg OI

250
200
150

2,000

100

1,000

50

-

-

Interest
Open Thousands

S&P 500 Adjusted Interest Rate Total Return Futures
Quarterly ADV and OI since launch• Online calculator available on CME website
helps to calculate final AIR TRF future pricein index points•

Q1-2023 ADV was 4.2K with OI averaging
255K contracts. Notional OI now at $54B.

• Trading and Open Interest is occurring
across the full maturity profile all the way to
6 years out
Data source: CME Group

Source: CME Group, as of Mar 1, 2023
CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

27

8

AIR Total Return Futures
AIR TRF Design & Tools• The AIR Total Return futures (AIR TRFs) valuation has three components:
Index Price – Accrued Financing + Financing Spread Adjustment.
1) Equity Index Component••

Based on SPTR index
AIR TRF is always traded on the official index daily close, as the trade can only be transacted via BTIC

2) Accrued Financing Component•••

The Accrued Financing is the sum of the daily financing from the initial launch date Sep 21, 2020 onwards
The benchmark rate used in AIR TRFs is the Overnight Effective Federal Funds Rate (EFFR)
The Accrued Financing amount is netted daily with the equity index level3) Financing Spread Adjustment (FSA) Component••

When trading the AIR TRF the counterparties will agree to a spread above or below (EFFR) for the remaining maturityof the futures contract
This spread will be known as the TRF Spread and will be traded in basis points

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9

S&P 500 Dividend Futures
Delivering Capital-Efficient Products for an Evolving Regulatory Environment•

Q1-2023 ADV was 4.5K contracts per day (+5% vs. Q4-22)•

New participants continued to enter the market with Large Open Interest Holders (LOIH) averaging 94 in Q1-23•

OI reached a monthly average of 180K in Q1-23•

Capital efficient, margin of 4% per contract, can be more efficient than OTC alternatives
S&P 500 Annual Dividend Index Futures
Annual ADV and average Open Interest
4,500

250,000

200,000

ADV

3,500
3,000

150,000

2,500
2,000

100,000

Average Open Interest

4,000

1,500

1,000

50,000

500
0

0
2015

2016

2017

2018

2019

2020

2021

2022

Source: CME Group, as of Mar 1, 2023
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29

Thank you

CME GROUP PUBLIC© 2023 CME Group. All rights reserved.

Contact the Equity Products Team
Visit cmegroup.com to learn more about our product offering and access free tools and reports
North America
Tim McCourt

Brian Burke

Richard Co+1 212 299 2415

+1 212 299 2236

+1 312 930 3227

Tim.McCourt@cmegroup.com

Brian.Burke@cmegroup.com

Richard.Co@cmegroup.com

Giovanni Vicioso+1 212 299 2163

Murphy Brennan+1 312 930 3411

Kate Fry+1 312 930 3276

Giovanni.Vicioso@cmegroup.com

Murphy.Brennan@cmegroup.com

Kate.Fry@cmegroup.com

EMEA

APAC

Paul Woolman+44 20 3379 3312
Paul.Woolman@cmegroup.com

Minah Kim

+65 6593 5506
Minah.Kim@cmegroup.com

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