CME Group has expanded the range of products covered by its “Basis Trade at Index Close” facility, a move aimed at addressing the needs of institutional investors.
In November, the exchange added three of its most popular equity index futures to the service: E-mini S&P 500, E-mini Nasdaq-100 and E-mini Dow ($5) Index futures. That complements a range of equity index futures already available for BTIC trading, including sector index futures and several FTSE Russell futures that were listed on CME in October.
BTIC transactions enable market participants to execute a basis trade relative to the official close for the underlying index. For institutional investors, that results in more efficient cash management, according to CME.
The exchange also moved in November to expand the options for executing BTIC trades. The trades previously could only be executed as block trades, but now nine of the more liquid contracts can also be executed on Globex, the exchange’s electronic trading platform. Nine brokers, including Bank of America Merrill Lynch, Credit Suisse, Goldman Sachs and UBS, are currently listed by CME as market makers for BTIC trades.
A BTIC transaction is entered into via a basis expressed in discrete index points, where the executed trade price is the total number of index points to be applied to the official close price of the underlying index. In essence, a BTIC transaction provides the ability to trade the future at a price understood to be the theoretical equivalent of the official cash index close with given assumptions on dividends and all-in implied financing to maturity.
