Russell 1000 Index Futures Contract on ICE

Transcription

1 Russell 1000 Index Futures Contract on ICE FAQ January 2009 This material may not be reproduced or redistributed in whole or in part without the express, prior written consent of IntercontinentalExchange, Inc. Copyright IntercontinentalExchange, Inc All Rights Reserved.

2 What is the Russell 1000 Index? The Russell 1000 Index is a benchmark that measures the performance of 1,000 equity securities that represent the large-cap segment of the US equity universe. The Index represents approximately 92% of the capitalization of the US stock market. The Russell 1000 Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing stocks are reflected in the Index price. The Russell 1000 Index includes the largest 1,000 securities in the Russell 3000 Index. To learn more about the Russell 1000 Index, please visit Is the Russell 1000 Index adjusted or rebalanced? Yes, the Russell Index is rebalanced annually in the month of June. An example of a schedule for the rebalancing is shown below Schedule June 11 Preliminary lists of additions and deletions to the Russell 3000 June 15 & 22 Updates to the lists of additions and deletions June 22 Reconstitution final after the close of the US markets June 25 Final membership lists posted for the Russell 3000, Russell 1000, Russell 2000, Russell Midcap and Russell Microcap indexes What is the contract size of ICE Futures U.S. SM s Russell 1000 contracts? Are the contracts fungible? ICE Futures U.S. s Russell 1000 futures contracts are offered in two sizes. The regular size contract (contract symbol R) has a value of $500 X the Russell 1000 Index. ICE Futures U.S. s mini-size Russell 1000 contract (contract symbol RF) has a value of $100 X the Russell 1000 Index. At an Index level of around in May 07, the value of the regular contract (R) is $412,500, and the value of the mini-size contract (RF) is $82,500. Post-trade and for offset purposes, the contracts are fungible at the clearing level (that is, one R contract may be exchanged for five RF contracts, and five RF contracts may be exchanged for one R contract). Please ask your broker about offset procedures. What are the trading hours? ICE Futures U.S. s Russell 1000 contracts routinely are available for trading electronically on the trading platform of the IntercontinentalExchange from 8:00 p.m. to 6:00 p.m. (next day) Eastern time Sunday through Friday. Electronic trading closes at 6:00 p.m. on Friday afternoon. The contracts normally are available in open outcry trading on the ICE Futures U.S. trading floor from 9:30 a.m. to 6:00 p.m. Eastern time Monday through Friday. The mini Russell 1000 futures contract is available only for electronic trading. A position established in electronic trading may be offset in open outcry, and vice versa. Also, at expiration, the expiring contract ceases to trade at 6:00 p.m. on the third Thursday of the contract month. Please check ICE Futures U.S. rules for other special circumstances that may affect trading hours. How many Russell 1000 contract months are listed? Can I trade calendar spreads? Will there be implied prices for the spreads? Four contract months in the March/June/September/December quarterly cycle are listed for trading at one time. On the ICE electronic trading platform, all combinations of the first four quarterly contracts will be listed as spreads, with all spread prices being fully implied. Calendar spreads are also available for trading in open outcry. ICE Futures U.S. Russell 1000 FAQ v2.3- January 2009 Page 2

3 How is the contract settled daily? The contract is settled daily to the average price of all open outcry and electronic transactions in the closing period (4:14-4:15 p.m. Eastern time). When is the last trading day and how is the final settlement price determined? The last trading day is the third Thursday of the contract month. On the contract s last trading day, trading ceases at 6:00 p.m. Eastern time. The contract is cash-settled to a special calculation of the Russell 1000 Index based on the opening prices of the component stocks on the third Friday of the contract month. For details and exceptions, please visit Do I receive or need to deliver stock if the contract is held to expiration? The Russell 1000 contracts are cash-settled. If a Russell 1000 Index futures position is held to expiration, the account of the holder of the position will either be debited or credited, depending on the position and the final settlement price. No stock changes hands at expiration. What are the advantages of an equity index futures contract compared to actual equity shares?. The Russell 1000 futures contract offers immediate investment exposure to all 1,000 stocks in the Index simultaneously in a single, low-cost, efficient transaction.. The risks inherent in holding a portfolio of securities can be managed more efficiently and with less disruption with stock index futures than by transactions in the individual securities that make up a portfolio.. Futures transactions enjoy certain margin and tax advantages over transactions in individual securities. Please visit: for margin requirements for the ICE Futures U.S. Russell 1000 contracts, and consult your tax advisor about the tax treatment of futures transactions. What are the advantages of an equity index futures contract compared to Exchange Traded Funds (ETFs)? Index futures contracts have the same margin and tax advantages compared to ETFs as they do when compared to other securities. In addition, ETF investors bear an expense ratio or management fee that holders of stock index futures do not incur. Russell 1000 futures are also listed on other exchanges; why should I consider ICE Futures U.S.? The notional value of the open interest in ICE Futures U.S. s Russell 1000 contracts exceeds that of Russell contracts offered by other exchanges by a factor of ten (May 2007), and was close to $3 billion in the Q2 07. ICE Futures U.S. was the first exchange to list and trade Russell 1000 Index futures beginning in March 1999, and the Exchange has the focus of the institutional market. Offering ICE Futures U.S. s Russell 1000 contracts for trading on the ICE electronic platform increases the transparency, distribution and accessibility of the ICE Futures U.S. contracts. These improvements should serve to enhance the liquidity of the contracts, and, consequently, narrow bid/ask spreads. In addition, the Exchange has put in place a market maker program to help support continuous liquidity in the contracts. I am an equity portfolio manager benchmarked to the Russell 1000 Index. I currently use S&P 500 Index futures contracts to manage my portfolio. Why should I change? There are at least four reasons you might consider switching to ICE Futures U.S. s Russell 1000 contract for the management of your portfolio: To minimize or eliminate tracking error. ICE Futures U.S. Russell 1000 FAQ v2.3- January 2009 Page 3

4 The Russell 1000 Index has outperformed the S&P 500 Index in 20 of the last 28 calendar quarters (as of May 2007). Using the Russell 1000 Stock Index futures contract minimizes or eliminates tracking error to your benchmark. To roll a position forward electronically. Four contract months in the March/June/September/December are available onscreen for trading at any one time, meaning that the calendar spread is available for electronic execution. Executing the quarterly roll of your position onscreen eliminates floor brokerage charges. To take advantage of lower Exchange transaction fees. Exchange fees for trading the Russell 1000 contract at ICE Futures U.S. are lower than those for trading the S&P 500 Index futures contract. For non-members, the Exchange fee for trading the regular size Russell 1000 contract (contract symbol R, $500 X Index), is $1.35/contract/side. The nonmember fee for trading the mini-size Russell 1000 contract (contract symbol RF, $100 X Index) is $.94/contract/side. ICE Futures U.S. s transaction fees for screen trading in both these contracts represent a significant savings from published non-member fees for trading S&P 500 futures contract. To benefit from favorable margin requirements. As of June 2007, margin requirements for Russell 1000 Index futures contracts compared favorably with those for S&P 500 futures contracts for both the regular size and min-size contracts. In June 2007, the initial margin requirement for Russell 1000 futures (R, with a $500 multiplier) was $13,000; the margin requirement for the mini Russell 1000 (RF, with a $100 multiplier) was $2,600. Margin rates are subject to change; please consult for up-to-date margin requirements. What are the exchange fees for trading the ICE Futures U.S. Russell 1000 futures? Non member transactions in the regular size contract (R) are $1.35/contract/side. Non-member transactions in the mini-size contract (RF) are $.94/contract/side. Please visit for fees for other categories of market participants. Can I get real time prices from quote vendors? Real time prices are available on independent software vendor (ISV) solutions, on direct access user systems, and from the standard quote vendors. For a list of participating ISV s please visit: For a list of standard quote vendors please visit Where can I find margin information? Margin rates can be found at The contract is be cleared and marked to market by ICE Clear U.S. sm, Inc (formerly the New York Clearing Corporation). Where are ICE Futures U.S. s Russell 1000 futures contracts cleared? The contracts are cleared by ICE Clear U.S. sm, Inc. What regulatory body oversees the contract? ICE Futures U.S. functions as a designated contract market as defined by the US Commodity Exchange Act. ICE Futures U.S. and all ICE Futures U.S. contracts are regulated by the US Commodities Futures Trading Commission (CFTC). Who can provide further information? ICE Futures U.S. Russell 1000 FAQ v2.3- January 2009 Page 4

5 Your usual ICE account manager can provide additional information and assistance in accessing electronic trading in the DX futures contract on the ICE platform. Other contacts are provided below. ice helpdesk The information herein has been compiled by ICE Futures U.S. for general purposes only and is not intended to serve as investment advice. While every effort has been made to ensure accuracy, ICE Futures U.S. does not guarantee its accuracy or completeness or that any particular trading result can be achieved. ICE Futures U.S. assumes no responsibility and cannot be liable for any errors or omissions. Futures and options trading involves risk and is not suitable for everyone. Trading on ICE Futures U.S. is governed by specific rules set forth by the Exchange and is the authoritative source on all current contract specifications. These rules are subject to change ICE Futures U.S. Russell 1000 FAQ v2.3- January 2009 Page 5