While there is no central marketplace for the foreign exchange forex market, foreign exchange futures are one way to trade forex through exchange-traded contracts. Forex futures are similar to other futures contracts in that the currency pairs' exchange rates act as the underlying commodity in the exchange.
In , the Chicago Mercantile Exchange CME introduced a smaller version of currency futures contracts — the E-micro forex futures suite. These six currency pairs trade at oneth the size of the corresponding forex futures contracts and make forex futures trading more accessible to a wider variety of traders and investors, including active individual traders, small commodity trading advisors CTAs and small and medium enterprises SMEs.
Here we'll take a look at these forex futures and show you how you can incorporate them into your trading. What Are E-micro Forex Futures? E-micro forex futures contracts include six exchange-traded currency futures contracts that are one-tenth the size of the traditional currency futures contracts. For the trader or investor, this equates to reduced margin requirements and less risks than are associated with the E-micro's big brothers.
The E-micro forex futures contracts are traded exclusively on CME Globex, which is the Chicago Mercantile Exchange's electronic trading platform and the world's largest regulated forex marketplace.
Figure 1 shows a comparison of contract specifications between the standard currency futures contracts and their corresponding E-micro contracts. These three smaller contracts are fully fungible with the full-size forex futures contracts.
Three of the contracts are fully fungible with the CME group's full-sized forex futures contracts: Margins and exchange fees are scaled down proportionately to the full-size contract. Regularly updated margin requirements for the E-micro contracts can be found by contacting the CME. For related reading on margin, take a look at Forex Leverage: Like other futures products, each contract has specifications regarding the size of the contract, the minimum price increment and the corresponding tick value.
These specifications allow traders to understand the dynamics of each contract and determine the potential profit or loss for particular price movements. Figure 2 also shows each contract's ticker symbol.
As futures contracts, each symbol must also be followed by the contract month and year to define the particular contract. The E-micro forex futures contracts trade with set expiration dates on a quarterly cycle, with contract months falling in March designated as "H" , June "M" , September "U" and December "Z".
Safety and Security of the E-micros As futures contracts, E-micro products are part of an exchange-traded, regulated market. Unlike the cash forex market, where different participants see different prices depending on the broker , pricing is centralized and all market participants have access to the same wholesale bid and ask prices with E-micro forex futures contracts.
Forex futures operate differently from traditional futures. CME Clearing acts as the counterparty to every trade. In other words, CME Clearing is the buyer to each seller, and the seller to each buyer, virtually eliminating any counterparty credit risk. All trades are matched and settled by CME Clearing.
In addition, customer funds are kept completely segregated. At one-tenth the size of the full-size contracts, the E-micros offer traders the opportunity to trade forex in a regulated marketplace and with reduced margin and risk exposure. In addition, for traders interested in the full-size contracts, the E-micros provide a practical introduction to their big brothers. Learn how to enhance your forex trading system with a strategic schedule. Dictionary Term Of The Day. Broker Reviews Find the best broker for your trading or investing needs See Reviews.
Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. A celebration of the most influential advisors and their contributions to critical conversations on finance. Become a day trader. A comparison of contract specifications between the standard currency futures contracts and their corresponding E-micro contracts Three of the contracts are fully fungible with the CME group's full-sized forex futures contracts: The contract specifications for each of the six E-micro forex futures contracts.
How much a fixed asset is worth at the end of its lease, or at the end of its useful life. If you lease a car for three years, A target hash is a number that a hashed block header must be less than or equal to in order for a new block to be awarded.
Payout ratio is the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as No thanks, I prefer not making money. Get Free Newsletters Newsletters. A comparison of contract specifications between the standard currency futures contracts and their corresponding E-micro contracts.More...