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The Mini FTSE 100 Index futures contract is a smaller contract size version of the existing FTSE 100 Index futures contract and has been developed for the private investor.
"Just like the highly popular 'e-mini' S&P 500 futures contract in the US market, the Mini FTSE 100 Index futures contract will enable the retail investor to trade in the movement of the entire FTSE 100 Index for a fraction of its cost. This is one of a number of exciting initiatives that form part of our equities strategy, announced three weeks ago, aimed at opening the doors to a wider trading community." said Karen Dixon, LIFFE's Marketing Director.
Commenting on the launch, Dan Casey, Managing Director, Marketing and Development at LIFFE, said, "LIFFE recognises the growth in retail trading of financial products and is committed to providing products and services that meet the needs of retail investors. Futures and options offer retail investors increased flexibility and additional opportunities in managing their investments. The Mini FTSE 100 Index futures contract brings index futures trading closer to the private investor through its smaller contract size and smaller margin requirements."
The main features of the Mini FTSE 100 Index futures contract are:
Its contract value is £2 per index point compared to the main FTSE 100 Index futures contract of £10 per index point, i.e. one-fifth the size of the main contract.
The contract is fully fungible with the existing FTSE 100 Index future, with the Exchange providing a facility for the netting of opposing, equivalent value positions between the two contracts. For example if you buy five Mini FTSE 100 Index futures contracts and sell one FTSE 100 Index futures contract, the two positions would be of opposing equivalent value and could therefore be netted against one another.
Positions held overnight in both the Mini FTSE 100 Index future and the main FTSE 100 Index future, attract 'margin'. The Mini FTSE 100 Index future will attract one-fifth of the FTSE 100 Index futures' margin. Where opposing, equivalent value positions are held in the two contracts and haven't been 'netted', a margin offset of 100% will be granted by the London Clearing House, thereby eliminating margin requirements for opposing equivalent value positions.
The final settlement price at expiry of the contract, which is used for cash settlement of the contract, will be the same as the final settlement price of the FTSE 100 Index futures contract, thereby ensuring that arbitrage trading between the two contracts keeps the market prices closely aligned.
The contract enables the retail investor to gain exposure to, and trade the movements of, the FTSE 100 Index at a fraction of the cost of trading the constituent shares of the Index.
