FairX launches two new stock index futures—Bloomberg US Large Cap Index and the SuperTech Index
Micro and Nano contracts will be available to retail traders
Tick value is always $1 and exchange fees are lower than other exchanges
For years, stock index futures contracts were mostly out of reach for the average retail futures trader, with high exchange fees and steep prices for single contract sizes. Even when contract sizes slimmed down to become more affordable, tick values (the minimum price increment a particular contract can fluctuate) and exchange trading fees were still an issue.
A new exchange cut trading fees and simplified tick values so retail futures traders can easily access certain stock index futures.
The recently launched FairX exchange offers retail market participants around the world access to two stock indices through the Bloomberg US Large Cap Index Futures and SuperTech Index Futures. Both contracts offer trading virtually 24 hours per day, 6 days per week and have Micro and Nano contract sizes. Whether you’re trading the Micro or Nano contract, the tick value will always be $1 and, like other Index futures products, these contracts are cash settled.
The Bloomberg US Large Cap Index tracks the 500 largest U.S. companies by market cap, and this index is highly correlated to major U.S. equity benchmarks, according to the exchange.
The Micro contract size is $10 times the index. So, if the index is trading at 2295, the notional value would be $22,950. The Nano size is $100 times the index—if the index is trading at 23, the notional value, also known as “contract’s value” would be $2,300.
As the second contract’s name suggests, the SuperTech Index focuses on tech companies, tracking 15 of the largest, most-liquid, and prominent U.S. stocks representing the broader Technology sector of high-growth tech, media, and manufacturing industries.
For SuperTech Futures, a Micro contract is $10 times the index. If the index is trading at 3325, the notional value would be $33,250. The Nano size is $100 times the index, so if the index is at 33.26, the notional value would be $3,326.
Get to Know FairX Futures
Enter the specific symbol in the thinkorswim® platform.
- /LB5 for the Micro Bloomberg US Large Cap Index Futures/B5 for the Nano Bloomberg US Large Cap Index Futures/LTEC for the Micro SuperTech Cap Index Futures /TEC for Nano SuperTech Index Futures
Put on your analyst hat and use the analysis tools you’d typically use with anything else.
The chart below shows the contract specs:
|Exchange Product||Symbol||Index Price (as of 11/19/21)||Contract Size||Notional Value (as of 11/19/21)|| Tick
Size and Value
|Exchange Trading Hours|
|Micro Bloomberg US Large Cap Index Futures||LB5||2472.80||$10 x MBF Index||$24,728||Min tick size = 0.10 index points; min tick value = $1||Sun–Fri 6 p.m.–5 p.m. ET|
|Nano Bloomberg US Large Cap Index||B5||24.73||$100 x NBF Index||$2,473||Min tick size = 0.01 index points; min tick value = $1||Sun–Fri 6 p.m. –5 p.m. ET|
|Micro SuperTech Cap Index Futures||LTEC||3872.00||$10 x SuperTech Max Index||$38,720||Min tick size = 0.10 index points; min tick value = $1||Sun–Fri 6 p.m. –5 p.m. ET|
|Nano SuperTech Index Futures||TEC||38.69||$100 x SuperTech Index||$3,869||Min tick size = 0.01 index points; min tick value = $1||Sun–Fri 6 p.m. –5 p.m. ET|
Unique to Retail Traders
Adam Hickerson, Director, Futures and Forex at Charles Schwab Futures and Forex LLC, noted that a futures exchange geared to the needs of retail traders is unusual.
Since the first futures exchange opened more than 150 years ago, these marketplaces catered first to grain farmers and end users, then to commercial financial traders, who traded contracts in large quantities. This new exchange is different.
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“If you look at FairX’s website, the first thing stated is it was founded in collaboration with leading industry firms to deliver futures products that meet the needs of active retail investors globally,” Hickerson explained.
Putting the tick size at $1 is significant because it makes trading much more simplistic and easier to calculate. Other exchanges use fractional tick values, such as $1.25 for the Micro E-mini S&P 500 futures or $12.50 for the E-mini S&P 500 futures at the CME Group, according to Hickerson.
Fees are substantially lower than other exchanges. For retail traders, FairX charges a fee of $0.05 for Micro contracts and $0.02 for Nano contracts, while fees to trade E-Mini S&P 500 are $1.23 per contract, and $0.25 per contract for Micro E-mini S&P 500, making FairX a major cost saver. This is, of course, in addition to fees normally associated with trading futures, like commissions and NFA fees.
Notional values for FairX’s Nano contracts are smaller, making it easier for the average retail trader to handle. The notional value for the Bloomberg US Large Cap is about $2,000, while the E-Mini S&P is just over $213,000 at mid-July levels and $21,000 for the Micro E-Mini contract.
Hickerson commented that any trader at TD Ameritrade who has a futures approved account with Charles Schwab Futures and Forex LLC can trade on FairX, and it’s subject to the same rules and regulations of all other futures exchanges. Contract sizes like Nanos can be a good way for novice futures traders to get their feet wet, especially if they’re hesitant to experiment with these vehicles.
“Nanos are designed specifically for people who are brand new to futures and maybe concerned about the risk or don’t want to put up that much capital to start trading,” Hickerson said.
Trading futures carries unique and substantial risks that you should understand before trading them. If you’re considering trading FairX futures, try them out in your paperMoney® account before trading with real money.
Futures and futures options trading services provided by Charles Schwab Futures and Forex LLC. Trading privileges subject to review and approval. Not all clients will qualify.
TD Ameritrade or one of its affiliates maintains an ownership interest in FairX and may receive financial benefits when trades are executed on the exchange.