As someone who has been in the futures industry for over two decades, I’ve seen numerous attempts to make futures more accessible to retail traders. Most failed.
But, the introduction of micro futures in 2019 marked a fundamental shift in how the industry approaches retail participation. This month, I will explore why micros succeeded where others failed, and what this tells us about the future of futures trading.
The Historical Context
The futures industry has long struggled with a fundamental problem: contract sizes that were too large for most retail traders. The original futures contracts were designed for commercial hedgers—farmers, miners, and industrial users who needed to hedge large quantities of physical commodities. A standard gold futures contract at 100 ounces ($200,000+ notional value) or crude oil at 1,000 barrels ($75,000+ notional) made sense for commercial users but was far too large for most individual traders.
The industry’s first major attempt to address this came with the introduction of “mini” contracts in the 1990s. But it was the E-mini S&P 500 futures launch in 1997 that truly changed the game. Looking back at historical market data, in the year 2000 E-minis traded at an average price of 1450[1]. This implies a notional value of $72,500 (1450 $50), and an initial margin rate of ~$4,125/contract ((current margin rates of 5% $72,500) * 1.10). Not exactly micro level, but these margin rates made the contract approachable for retail and opened the door to a wider audience.
While revolutionary for its time, by 2019 the E-mini S&P 500’s $150,000 notional value (3000 index price $50) and initial margin of $8250 ((notional value .05)*1.10) had priced the contract too high for many retail traders.
The First Wave: Micro Equity Index Futures
When CME Group launched Micro E-mini futures in May 2019, they got several crucial things right:
● Contract size: 1/10th of E-minis
● Initial margin requirements around $1,500
● Same tick sizes and structure as their larger counterparts
● Full electronic integration with existing infrastructure
What made this different from previous attempts was the perfect alignment of several factors:
- An existing client base that could use micro-sized contracts to hedge more granularly or speculate between the micro and mini contracts, ensuring tight spreads
- Contract sizes that matched retail account sizes
- Broad adoption by retail brokers
- An existing and sophisticated electronic trading infrastructure
- Growing retail interest in financial markets
- The ability to offset the margins of the micro and mini contracts
Beyond Equities: The Expansion
Following the success of Micro E-mini equity index futures, CME Group systematically expanded the micro product suite:
● Micro gold (10-ounce vs 100 ounce standard contract) and micro silver (1000 ounce vs 5000 ounce standard contract) proved particularly popular with precious metals investors seeking more precise position sizing.
● Micro crude (100 barrels vs standard 1,000 barrels) was launched amid increased retail interest in energy markets and enabled retail traders to participate in oil market volatility with manageable position sizes, and cash versus physical settlement.
● Micro bitcoin (1/10th of a bitcoin vs standard 5 bitcoin) and micro ether (1/10 of a standard contact) provided a regulated, transparent alternative for crypto trading. This allowed US retail traders access to crypto derivatives in USD-based accounts without having to risk trading offshore.
The Customer Perspective
Traders may use micro futures contracts for a variety of strategies due to their smaller size, lower capital requirements, and flexibility[2]. Here are some of the main strategies:
- Speculation on Market Direction Traders may speculate on the price movements of indices like the S&P 500, NASDAQ-100, or commodities using micro futures. They employ technical analysis to identify entry and exit points while managing risk with stop-loss orders.
- Portfolio Hedging Micro futures are used to hedge portfolio risks with precision. For example: • Delta Hedging: Traders may offset the delta exposure of options positions by using micro futures, which allow fractional adjustments compared to standard contracts. • Beta-Weighted Hedging: Investors align their portfolio’s beta with the underlying index and may use micro futures to reduce exposure to market downturns.
- Risk Management and Scaling Micro contracts may enable traders to fine-tune position sizing and risk management. They allow precise scaling in and out of trades, especially when adhering to strict stop-loss or percentage-based risk limits.
- Diversification Retail traders may use micro futures to gain exposure to multiple asset classes (e.g., equity indices, metals, or cryptocurrencies) without requiring significant capital, thus diversifying their portfolios.
- Options Strategies[3] Micro E-mini options could be integrated into strategies like protective puts or call spreads. These smaller contracts enable traders to execute multi-leg strategies with reduced cost and exposure.
- Learning and Strategy Testing New traders could potentially use micro futures as a way to transition from demo accounts to live trading. The smaller contract size reduces financial pressure while allowing psychological adaptation to real-money trading.
While volume is still developing, CME Group has launched a slew of additional micro contracts that have the capability of further expanding the ecosystem and use cases for the products.
In Metals, there are now micro copper and micro palladium futures. FX lists micros for Euro FX, AUD, GBP, CAD, CHF, JPY, and Indian Rupees.
In Fixed Income, there are micro–Ultra T-bonds and micro 10-year T-notes, as well as 10-year and 2-year yield contracts, which allow traders to speculate on the direction of interest rates. If you think interest rate yields are going to rise, simply buy the contract, if you think interest rate yields will fall—sell.
Finally, micro equities are now listed on the Nikkei (MNI), the Midcap 400(MMC), and the Smallcap 600 (MSC).
And just this week[4], CME Group announced the launch of five new micro contracts on agricultural commodities, including micros on corn and soybeans.
Conclusion
The success of micro futures represents more than just new products—it represents a fundamental shift in how the industry thinks about retail participation. By making futures markets more accessible while maintaining their essential characteristics, micros have opened new possibilities for both traders and market operators.
Looking ahead, the principles that made the micros successful will likely guide the next wave of innovation in futures markets. The key will be maintaining the balance between accessibility and market integrity that has made these products so successful in the first place.
Note: Some data points and statistics referenced in this article come from internal industry analysis and direct market observation. Readers are encouraged to verify current market statistics through their brokers or the CME Group website, as market conditions and statistics change over time.
[2] https://bookmap.com/blog/micro-futures-a-short-guide?t
[4] https://finance.yahoo.com/news/cme-targeting-retail-traders-micro-120000716.html