In a year which has seen unprecedented volatility for US small-cap stocks as reflected by performance for the Russell 2000® Index, investor interest in hedging risk through futures based on the index has grown.
After running a relatively flat +1.6% total return from the beginning of the year through February 19, the Russell 2000 declined 40.3% from February 19 through March 23. And from March 23 through May 1, the Index rose an astonishing 24.1%, including a 13.8% rise in April.
Amid this period of heightened uncertainty for US small-cap stocks, investor interest in futures based on the Russell 2000 has grown. For example, volume in the CME Micro E-mini Russell 2000 futures grew exponentially during Q1 2020. Launched a year ago, these smaller versions of the successful E-mini futures contracts at CME Group provide cost-efficient access to the equity index futures markets. Since launch, average daily volume (ADV) has increased from less than 30,000 in May 2019 to more than 85,000 in April. A record of more than 123,000 contracts ADV traded in March, a very volatile month for US equity markets as a whole.
“The rise in investor interest in our Micro E-mini Russell 2000 futures in the past year helps illustrate the growing and broadening demand for tools to help manage small-cap equity price risk, especially during periods of uncertainty. At a tenth of the size of our existing E-mini contracts, Micro E-mini futures are accessible to a broader set of investors and have helped to expand the market for futures based on the Russell 2000.”
Waqas Samad, CEO, FTSE Russell & group director, Information Services, LSEG:
“We congratulate CME Group on its work to broaden access to futures based on the Russell 2000 Index to help investors better navigate and manage through market volatility. Growing interest in the Micro E-mini Russell 2000 futures contracts illustrates the power of combining the index innovation of FTSE Russell with the futures market innovation of CME Group.”
For more insights on the US small-cap equity market, look for the latest blog from FTSE Russell’s Global Market Research team on the FTSE Russell website.
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