What Are E-Micro Forex Futures?

E-Micro Forex Futures are a type of currency futures contract that is traded on CME Globex, an international trading platform that specializes in futures and options contracts. E-Micro Forex Futures are unique in that they are one-tenth the size of a standard forex futures contract.

Key Takeaways

  • E-Micro Forex Futures are a type of currency futures contract.
  • They are one-tenth the size of a standard forex futures contract.
  • Unlike other forex markets, E-Micro Forex Futures are traded on a centrally regulated marketplace operated by the CME Group.

How E-Micro Forex Futures Work

Futures contracts are a type of derivative product that uses currency exchange rates as its underlying. Typically, currency futures contracts trade in a standard size of 100,000 units of the base currency, such as $100,000 in the case of U.S. dollars (USD). E-Micro Forex Futures, however, are one-tenth this size, or 10,000 units of base currency per contract. Their smaller size makes them well-suited for investors who want to trade forex futures but with less total exposure than is required with the standard-sized contracts.

E-micro Forex Futures contracts are offered exclusively by the CME Group (CME), and traded on CME Globex, an electronic futures trading platform. Unlike traditional forex markets, which are operated non-centrally through a variety of brokers, the currency futures market is centrally regulated and operates through a common clearinghouse system. With approximately $100 billion in daily transaction volume, the CME Group currently operates the world’s largest centrally-regulated forex marketplace.

Currently, E-Micro Forex Futures contracts are available on six of the world’s most commonly-traded currency pairs: EUR/USD, USD/JPY, GBP/USD, USD/CAD, AUD/USD, and USD/CHF. For this reason, E-Micro Forex Futures can be useful for traders interested in the currencies of the European Union, United States, Japan, United Kingdom, Canada, and Australia, respectively. Looking beyond the E-Micro Forex Futures, the CME Group offers 49 different types of futures contracts in total, representing 20 underlying currencies.

Real World Example of E-Micro Forex Futures

In 2009, Larry Schneider, director of business development at the Chicago-based independent brokerage firm Zaner Group, explained why the micro-currency trading enabled by E-micro Forex Futures could be helpful for certain types of forex traders. 

Among these reasons were the fact that the CME Group’s currency futures network is centrally regulated, that it offers segregated customer accounts to limit counterparty risk, that it allows all trades to be executed electronically, and it provides cash-settled transactions that do not require traders to make or take physical deliveries.