What is the ASX 200 futures?

Summary

  • The ASX SPI 200™ futures enable investor to capitalise the movements in the underlying S&P/ASX 200 Index.
  • Trading in ASX SPI 200™ futures is available through international hubs, including London, Chicago, Singapore and Hong Kong.
  • Calendar spread trading functionality is also offered for ASX SPI 200TM futures with attractive spread concessions.

The ASX SPI 200™ futures (commonly known as the ASX 200 futures) are the benchmark derivative product for the Australian investors trading and hedging in the Australian equity market. The ASX SPI 200™ futures enable investor to capitalise the movements in the underlying S&P/ASX 200 Index. This allows them to get exposure to Australia’s top 200 companies without having to buy or sell shares in every company in the underlying index. ASX SPI 200™ futures has been approved for trading by the UK Financial Services Authority (FSA) and the US Commodity Futures Trading Commission (CFTC) and

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The ASX SPI 200™ futures, which is based on the S&P/ASX 200 Index, which is recognised as the benchmark for the Australian equities market and covers approximately 87% of the entire market capitalisation of listed companies in Australia.

Key features of the ASX SPI 200TM futures

Some of the important features of this benchmark derivative product are:

  1. It trades for day and night trading sessions, providing access for almost 24 hours a day. The trading timings are: 5:10 PM–7:00 AM and 9:50 AM–4:30 PM (US daylight saving time) and 5:10 PM–8:00 AM and 9:50 AM–4:30 PM (US non-daylight saving time).
  2. Trading in ASX SPI 200™ futures is available through international hubs, including London, Chicago, Singapore and Hong Kong.
  3. The ASX SPI 200™ futures are available for the next six quarterly expiry months and along with the nearest two non-quarterly expiry months.
  4. Trading in ASX SPI 200™ futures is conducted ’On-market’ via the electronic platform, ASX Trade24. However, it can also be traded ‘off-market’ through the Block Trade Facility and the Exchange for Physical Facility.
  5. Calendar spread trading functionality is also offered for ASX SPI 200TM futures with attractive spread concessions.

Read More: What is a Futures contract? How do Futures prices work?

So why to trade in ASX SPI 200TM futures?

Trading in the ASX SPI 200TM futures provides many benefits to investors, which could help them to navigate through. Some of the benefits are:

  1. Liquidity in the contract

Liquidity is one of the main criteria that should be considered before investing in any security. Lower liquidity could make it difficult for the investors to enter and exit a position with ease. This is due to the impact cost that is incurred on every order. In a nutshell, lower the liquidity, higher would be the impact cost and vice versa.

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Liquidity is determined by the volume of trading and being a derivative product of the benchmark index of Australia, the ASX SPI 200TM futures is quite decent.

  1. Efficient price discovery

The price discovery is simply the act of how efficiently a commonly accepted price for a security could be determined. Because the price of a futures contract is based on the forces of demand and supply, which is the net result for instant dissemination of all the available news and information, the price discovery becomes instant.

  1. Lower brokerage fees

The brokerage fees for trading in the ASX SPI 200TM futures is generally lower than when trading in the each of the underlying securities. To put it simple, with the brokerage fee of 1 product, an investor gets the exposure of 200 securities in the same proportion as in the underlying S&P/ASX 200 index.

  1. Reduction of counter-party risk

As it is a futures contract, the counterparty risk of a default is almost negligible. The clearing and settlement system takes care of this by collecting upfront margin from both the parties (buyer and seller).

  1. Leverage

The ASX SPI 200TM futures is a leveraged product, which simply means an investor can pay a part of the entire contract value of the futures contract to buy or short sell. This essentially increases the return on capital deployed. However, leveraged is like a two-sided sword, if it amplifies the potential return, it also amplifies the risk.

Contract Specification of the ASX SPI 200TM futures

Read More: What is a futures market?


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