By utilising world-class trading and clearing systems and a system of formal market makers ASX expects to attract professional investors as well as sophisticated retail investors to this new market.
The new contracts will be based on the S&P/ASX200 share price index and the S&P/ASX50 share price index. They are known as Mini futures because they have a contract multiplier of only $10 per point, rather than the multipliers of between $25-$100 that typically apply to the more traditional futures contracts.
The smaller multiplier means that it will equate to a notional contract value of around $33,000 dollars on present market levels ($10 x index value of 3,300). The smaller contract size is intended to make the products accessible to a broader pool of investors, who will also be able to take advantage of lower fees.
Mini index futures contracts have been particularly successful overseas in attracting a broad base of market participants. The E-Mini S&P 500 and the E-Mini Nasdaq 100 are among the top-10 most actively traded index contracts worldwide.
Mr Humphry said he expected both contracts would receive solid support. "We have selected the S&P/ASX 200 because it is the most widely used benchmark for Australian fund managers, and the S&P/ASX 50 because there is also interest in Australia and overseas in a narrower market leaders contract."
These products will also complement the two Exchange Traded Fund (ETF) products ASX facilitated with State Street Global Advisors (SSgA), which listed in August this year.
"ASX futures should appeal to both existing futures users and the growing number of investors who trade ASX options, warrants and ETFs. The options and warrants markets have grown by 40% and 100% respectively over the past year, demonstrating that many investors have recognised the advantages of prudently using leveraged instruments."
ASX Chief Operating Officer Colin Scully said the ASX Mini contracts would offer user-friendly scrip lodgement facilities. Contract holders will be able to lodge shares as cover for their initial margins with no exchange fee and without having to move those shares from their CHESS sub-account.
"This feature has proved particularly popular with options investors, with more than 80% of initial margins now covered by scrip. It highlights how investors benefit from an integrated trading and clearing environment. By making it easier for people to trade and cover their margins we have encouraged the options market to grow dramatically, and by not tying up investors' cash unnecessarily ASX is seeking to provide flexibility for investors and therefore encourage further trading activity," Mr Scully said.
"The ability to offer margin offsets is also planned as a future initiative for the new contracts, where an investor has opposite positions in the ASX options and futures markets."
Both the ASX Mini200 and ASX Mini50 will be supported by market makers, a practice which has contributed to the strong performance of ASX's options market.
"ASX is particularly appreciative of the support being shown by SG, AOT, TimberHill, Optiver and Goldman Sachs," Mr Scully said. "Each of these firms has advised us of their intention to make markets in these contracts, and others have also commenced preparations. Each of these firms has global experience in market making."
Institutional investors are also active users of futures contracts, and ASX believes the ASX Mini50 and ASX Mini200 will form a key part of the professional investor's portfolio. "ASX is offering a contract over the market leaders as well as the broader based benchmark, scrip cover and a fee scale commensurate with a smaller contract size," Mr Humphry said.
Institutional investors should note that both contracts will expire a week ahead of the end of financial quarters. The settlement price for contracts held to expiry will be calculated using the opening price of each share in the index on the expiry day.
"ASX now offers an integrated trading and clearing environment where investors can trade shares, options, warrants, interest rate securities, ETFs and equity-based futures contracts. ASX joins the select few already able to offer such a highly sophisticated service and comprehensive range of products," Mr Humphry said.
"This is a highly significant step, both for ASX and for Australia. It puts us on a better than equal footing with our peers worldwide, and also enables ASX to further develop its existing relationship with those exchanges."
