 Well, if anyway, thank you all. Thank you, Patrick and thank you, Tick Mill. My name is David Gibbs. I'm with the CME Group in Chicago and I'm delighted to be with you this evening. We're going to be exploring many things in tonight's presentation. We're gonna begin with an overview of the listed derivatives marketplace. We're gonna talk a little bit more about how CME fits into that ecosystem. Talk it to some limited degree about some foundational or basic aspects of the futures contracts and how they're constructed and how they operate. A little bit about the clearing relationship between CME as an exchange and a clearinghouse relative to its broker partners and FCMs like Tick Mill. And then we'll dive into a little bit of an explanation about equity index futures, a couple of trade idea strategies. And then we'll end with some Q and A. I wanna begin by saying I represent the Chicago or CME Group as an exchange and a clearinghouse and what I'm presenting today is meant to be educational and informative and is in no way recommending or advocating that you trade futures and options nor is what I'm gonna be presenting considered to be or should be construed as a trading recommendation. I am by law restricted from giving investment advice. So take this as educational rather than as a recommendation. Thank you for indulging me there. To begin with the listed derivatives business or the futures industry is a global marketplace. It's big, it's global, it takes place all over the world. And as an example of what you're looking at here are slides from data produced by the World Federation of Exchanges, which is an association of approximately 50 exchanges around the world that list and trade derivatives. And you can see from the slide on the left, the blue columns show that the total contracts traded and it's an upwardly sloping graph. The lines in it depict the growth by region. And while there is steady growth in the MIA area, there's been tremendous growth in the Americas and extremely strong growth out of the APEC region. So when we say this is a global industry, I'm not kidding. It takes place around the clock, around the world with tremendous regional growth, particularly in the Asian areas. And a pretty good split these days between futures and options. If you look to the right, the green bar represents in the latest report 55% of these contracts being futures and 45% being roughly the options share. So it's a big business, it's a global business and it's an important business. Exchanges do make a real contribution to the economy by providing places for people to go for price discovery and for risk transfer. And the thing that differentiates the futures as it's represented by CME is this listed and cleared aspect. The central clearing of all of our products provides an added layer of transparency, marking to market every single day gives added value to understanding what your price exposure is. And then the margining and in futures language when we talk about margin, it's different than margins on stocks. If you have a stock trading account, you can buy on margin. That means you borrow capital from your broker to purchase a real asset. Margin in the futures business is different. The margins as I speak about them will be about the security deposits or the collateral that is required and is by statute required to be posted to the clearing house through your broker to secure an open position in a standardized futures product. That margining reduces systemic risk in our system because it's designed to take into account the risk parameters of the products. So margins in highly volatile times go up and when volatility drops, margins can go down. But their intention is to secure the risk of the position for the entire system, not just the participant that's long or short but everyone in the system. So what is CME all about? It's all about this little four letter word in English called risk. Risk is what we're about. We grew up a long, long time ago in the agricultural markets in Chicago. And by commercial users who were designed to use our products to lay off the risk they inherently have. So we come to the world from a commercial user standpoint. We began as physical exchanges with physical open out cry markets centered around trading pits. And what you're seeing in the background of this slide is a ceiling shot of the old S&P 500 pit on the floor of the Chicago Mercantile Exchange. They were huge, they were rowdy, they were very physical. This is what our business looks like today. It's converted to an electronically driven industry with a warehouse full of computer servers out in the Western suburbs of Chicago where our business can be conducted much faster, 24 hours a day, almost seven days a week. CME's markets on its electronic globalx platform open at five o'clock Chicago time on a regular trading day beginning Sunday night and trade until generally 4pm the following day up until Friday at 4pm and then we shut down for the weekend. Every day we're closed from one hour from 4pm to 5pm Chicago time for a technology or a technological refresh and a reset. That's the speed on which this business is done now. Another key component to the futures industry that is a differentiation between the over the counter market or even the stock markets around the world is this idea of a central limit order book. And this is sometimes shortened to CLOB or CLOB. A central limit order book like CME operates on globalx means all of the orders on a product go through one pipeline. All the bids, all the offers, all of it into one central place so that all the market participants can see all the activity all at the same time in real price terms. There's no fractionalization of the orders and orders placed by FCMs go into globalx. They're not saved or held back to where they can be matched internally. They all have to be submitted into globalx. So as users of the futures market as represented by CME you have the confidence when you look at the quotes on our screen that you're seeing all the market activity all of the liquidity. And in many cases on certain platforms you can go back five or 10 layers deep on both sides of the market to see how deep our marketplace is. So over the years we've developed through mergers and acquisitions as well as organic growth a very wide range of benchmark products and asset classes. CME offers probably among the world's exchanges the largest and deepest selection of asset classes and trading products. These include products on agricultural and industrial commodities, metals, foreign exchange, interest rates and what we're gonna be focusing on in large part today equity index products. We even have developed and have listed products on things like Bitcoin, weather futures and volatility indices. But I wanna stress that these are generally benchmark products. They're recognized pricing indexes or products that are used commercially and institutionally by large risk managers and traders around the world. And most recently an expanding participation from self-directed retail traders. And in order to accommodate those CME develops futures contracts of various sizes from large notional value sizes that are used primarily by institutional or commercial users to what are now called micro E-mini contracts which have a much smaller notional value and are more accessible to self-directed retail traders. So what is a futures contract? Well, before we get to that let's talk about what it isn't. A futures contract is not an asset and I don't want you to be confused even though we're talking about things like equity index futures or other assets. The futures contract itself is not an asset. It's basically a price point in time. It's what it says it is. It's a futures contract. It does not convey any rights of ownership. So even if I buy or go long an equity index contract I don't own the underlying asset. I only have a right to or a participation in an index value for a future point in time. So I need to make that clear because futures contracts are not assets and they don't convey any rights of ownership. They don't require their full notional equivalent payment on purchase or sale. So what you're dealing with when you open a position in a futures contract is that concept of initial margin. And the initial margin on a futures contract is usually a fraction of the notional underlying financial risk. It's generally an equity index products like we're gonna be exploring something like seven to 12% of a contract's notional equivalent size. So you use or it takes potentially less capital to secure an open position in a futures contract than buying the equivalent underlying asset itself. But the difference is with the futures contract you have no rights of ownership because you didn't buy the asset. It's just a futures contract. At CME most of our contracts can be identified by letters and numbers. These are the contract identifiers. This is an example of the E-mini S&P 500 contract. It's trading symbol at CME is ES. It has certain contract expiration dates for the equity index products. These tend to be what we call March quarterly contract expires, March, June, September, and December. In this example, we're looking at or looking at the equivalent of a March, 2021 expiration that expires on the third Friday of March, 2021 in a couple of weeks. The symbol for March is the letter H and the last digit or the last figure there is the number one, which is the last digit in its calendar year, 2021. So when you see a symbol ES H1, that refers to the March, 2021 expiration of the E-mini S&P 500 futures contract. Each product trades in its own minimum tick increments or minimum price change increments and has its own price structure. In this case, the E-mini S&P is quoted in index points and in quarters of index points. So you can see at a price of 3907.50, that's not the notional equivalent, that's the price of the index. We'll get more into the pricing mechanism of these contracts in just a few minutes. This just as a further explanation of symbols can have letters and numbers and it would be important depending on the market provider that you're using to know what their symbols represent in terms of CME's contracts. Another key piece of information is how a futures contract is finally settled at expiration. When a contract expires at CME, their delivery or physical expiration or cash settlement or financial settlement. Physical settlement are like most of our historical commodity contracts, agricultural and energy, but also take into account things like some of our FX contracts and our US Treasury Futures contracts. These are all physically settled. At the end of their lifespan, there could be, depending on the participants and who's left in the open interest where a short position delivers an actual security to the long position for cash payment. The second form of settlement is known as cash settlement or financial settlement like the equity index products. These settle to a index value on last trading day and the settlement of the contract for the open interest that's still in the position just settles to cash. Loser pays the winter, contract expires and the positions that are dead and all financial obligation to them expires with the expiration. Every contract has its own contract definitions and specifications and before you trade a product you should know what those specifications are. They're listed on our website for every product that we list. This is important to you because it outlines the terms of the contract that you would be agreeing to by entering into a futures transaction. And you can see some of them listed on this table for E-mini S&Ps. The last things to consider here with respect to the futures market that might be new or slightly different if you're familiar with trading. I think everybody understands what average daily trading volume is. It's the number of transactions that take place. Whenever a buyer in a seller meet and create a trade that's considered volume. Stock markets produce volume records. Futures markets produce volume records. That's a pretty simple concept to understand. But in futures we also use another term called open interest. And open interest refers to any futures position put on in a session that isn't offset by the end of that session. So if I buy 10 E-mini futures contracts in a session and I sell five in the same session I will have offset five of the 10 contracts that I bought leaving me with a remaining balance of five long positions. I've created 10 contracts or 15 contracts of trading volume but I've also added five additional contracts to that contracts open interest because they're open, they haven't been offset yet. So open interest represents the amount of futures contracts that have been created in a previous session that have yet to be offset in that contract's lifecycle prior to expiration. Now, in futures there's only to my knowledge three ways you can eliminate a futures position. You either offset it with an opposing transaction in the same contract for the same expiration. In other words, if I'm long, 10 E-mini S&P five contracts for March expiration and I sell 10 my net position is zero. I have no position, I'm out of the market. The second way is what's known as rolling forward. As we approach an expiration date many of our market participants want to maintain an existing financial risk position in that product. Well, you can't have a position in an expiring contract so you have to make a decision prior to expiration. One of that's decisions could be taking your position and rolling it into or rolling it forward into the next calendar quarter or month. In equities it's quarterly. So if I'm long, 10 March contracts and I want to stay long in that particular product I would enter into a calendar spread transaction selling my March position and simultaneously creating a new position in the June quarterly contract month. That can be entered as a spread so there's no legging risk and it offsets whatever you had in March which now disappears and creates a new existing position in June. That's rolling forward, sometimes referred to as calendar spreads. The third is to go to the expiration process and I will say that in our industry a very, very small fraction of open interest ever makes it all the way to expiration. I think in most of our contracts it's less than 10% of the open interest on any product goes to expiration and that's because our markets weren't designed or intended to be used for physical transfer. They're simply designed to be used for trading, price discovery and price risk management. So final settlement at expiration is a subject for another webinar. Let's explore the clearing process a little bit. CME has four legacy exchanges. At one point they would have all had their own clearing facilities but since we've combined all of these into one business they all clear CME clearing. This adds an enormous amount of efficiency to the system. It also has reduced the costs for a lot of our commercial end users that trade across a broad line of products but what clearing does is it manages the post risk, post trade risk of a transaction. And if this illustration is useful, I'm glad because I think it visually shows you where clearing sits in the trading process. CME clearing and CME itself stand between the buyers and sellers. In other words, you're anonymous to the person on the other side of your trade. You'll never know who was on the other side because we take the other side automatically when you do the transaction. CME stands between the buyers and the sellers. This is an important thing to be aware of because in many cases it's again, distinctly different than the OTC market or even in many cases other types of exchanges. CME never takes a position in any of its products. We simply facilitate the transactions and then do the post trade risk management function. And this means that we monitor the capitalization of our member firms. We calculate and require the margins and maintain the margins on all of our facilities and all of our products. And as a result, we have some self-regulatory aspects that we have to take care of as far as our relationship with our clearing firms. But for your purposes, customers don't open accounts with CME directly. They can't. They have to use an intermediary known as a futures commission merchant, an FCM, which is another way of saying broker. The brokers intermediate. We deal directly with our clearing firms, which are the brokerage firms. They deal directly with the end customer. The end customer does not deal directly with CME. So there are no customer accounts at CME. There are merely clearing firms that have relationships with CME. We hold them accountable for the risk that they hold on account for their customers. We deal directly with them and then they intermediate between the end customer and our system. The only way you can gain access to CME's Glovex system is through a registered FCM. And we have been a regulated entity in the United States for about a hundred years. Our regulator is known as the Commodity Futures Trading Commission based in Washington. And we've had a solid working relationship since their inception in 1975, but the regulations go back to the 1920s. Okay, let's get into the meat and potatoes and talk a little bit about equity index futures. All of the equity futures products at CME are based on this idea known as benchmarking. And what is a benchmark? It's a means by which people measure themselves. In the financial markets, a financial benchmark like the S&P 500 is an index by which equity asset managers gauge their performance or in the event of a financial instrument like an ETF or a mutual fund that's benchmarked to the S&P 500, how well that product performs to the actual index itself is a review to its investors on how well those managers are performing. So it's a performance measure or it's a metric. And what we have tried to do at CME and what has been done around the world since the early 1980s when equity index futures were launched, you can see that this has done all over the world. There are equity indices on any major exchange around the world in Eastern Europe, in Latin America, in the Far East. And in many of these places where there are derivatives exchanges, there's a futures product based on those equity indices. You'll notice the different exchanges listed in the far right column. There are even some indices, like for example, the Nikkei 225 out of Japan that have futures contracts listed on multiple exchanges. The Nikkei 225 has a contract listed in Osaka in Japan. There's a Nikkei 225 listed in the Singapore exchange and CME has two futures contracts based on the Nikkei 225. One is in dollar terms, the other is in yen terms. So this again, speaks to the global aspect and the size of the listed derivative space. CME currently has 59 equity-based futures products of which we have 29 that also have options listed against them. These are just some of the more popular ones. We're gonna be talking about some of these products in just a few minutes. Before most popular equity index benchmark products are listed here and these are the e-mini versions. And I wanna point out that their names are on the left, the S&P 500, the NASDAQ 100, the Russell 2000 and the Dow Jones Industrial Average. These are all recognized benchmarks of equity indexes on US related shares. The symbols to the right represent their e-mini futures equivalents listed at CME. The multiplier is a number we're gonna spend a lot of time on in the next few minutes because this helps us determine the notional or the financial equivalent of these respective futures contracts. Each equity index product has its own fixed multiplier. And then you can see the index price in this case from the 4th of February. To get the notional equivalent, you simply multiply the index value times its fixed multiplier to get a dollar value. And you'll see these are all relatively similar in terms of their US dollar notional equivalent. Because of the success of the e-mini product and because of the fact the stock market has gone up so much in the last 10 years or so, the notional values in these contracts have gotten rather large. And for many of our retail or self-directed traders, they became too large for them to be able to use. So we've recently launched what we refer to as micro e-mini contracts. And these are smaller versions of the same products. Note the indexes are the same. The symbols are slightly different because it's a different futures contract. The multipliers are also smaller, which means based on the same index, you've got a much, much smaller notional equivalent. These products have taken off in a big way at CME because of the demand of the self-directed retail trader that wants more access to the market, more control over their future. And having smaller size contracts allows them to participate in our markets where they might have been boxed out in the past because of size. This slide speaks to the growth of the micro e-minis trading in our equity space. So the pricing mechanics are very, very simple. You can see from the table, and this is real data from CME Group, the quarterly contracts listed on the left, and these are for the micro e-minis. Their symbol is MES as opposed to the e-mini that's just ES. Quarterly contracts, March, June, Sep, Dece, and then you'll see a fifth quarter down there, March 22. Their index settlement values are in the next column. And then note the volume and the open interest. We're gonna come back to that notion in just a second, but let's focus now on that settlement price, 3928.00. That times the contract multiplier of $5 gives you a notional equivalent of $19,640. That's the financial equivalent value of one micro e-mini. Now, if you were to go along that micro e-mini contract, you don't have to put up $19,640 because you're not buying an asset. What you're buying or what you're paying for is a position, a long position in the micro e-mini futures contract for the March expiration. And that would require an initial margin deposit through your broker of let's say 10% or roughly $1,900 or say $2,000. That $2,000 is the initial margin and your FCM may require a slight degree of higher margin because of either credit or operational purposes. That's what's required to secure this position. That's how the futures contracts works, but make no mistake that you have not bought an asset that conveys any rights of ownership. You're not participating in the dividend income stream of the S&P 500. You simply have a price point and if you were to execute at this price, it would be 3928.00 and you've got the equivalent of an interest of a market risk of being long at that index value. Okay, coming back to that volume and open interest now, notice that the volume in the open interest tends to stay in the front quarterly contract. In other words, there's not a lot of what we call back month trading in equity index products. It tends to focus on the front contract and stay there until the quarterly roll. Now I mentioned earlier that the March contracts and equities will expire the third Friday of March. So about five trading days before, usually Thursday or Friday the week before, but certainly by Monday, Tuesday, Wednesday of the third week of March, you'll begin to see that open interest begin to roll from March to June. And as it does so, the volume will increase in the June and will decrease in the March until most of the open interest has rolled over prior to Friday. That's the quarterly roll, that's the calendar spread because most of our market practitioners want to maintain an open risk position in the futures market. In an order to do that beyond the third Friday of March, they have to have an open position in what will become the front month contract by Friday of the third Friday of March when June moves to the top step, the March 21s expire and a new contract, the June 22s gets listed and begins its trading. David, sorry to interrupt, just to clarify for everyone, I know myself when I started out trading futures, the role was something I struggled with a little bit. So can you just clarify exactly if I'm holding a position, let's say in the March and I want to, let's say I'm long, long a few contracts of the E-mini S&P and I want to roll that position into June and maintain my long exposure, how do I go about that? You execute what's called a calendar spread and in the case of the E-mini S&Ps and this is an order that you would execute with your broker and you should speak to your broker about this before you do it so you understand the mechanics but a calendar spread or any spread is the simultaneous purchase and sale of two separate futures contracts. So in a calendar spread, like the one we're referring to here, if you're long March and you want to remain long after the March expiration, you would sell the spread by selling the March and buying the June contract at a predetermined price differential that's known as the spread level and it can be positive or negative depending on how the contract's priced. In this case, you're rolling forward to a lower priced futures contract. That will be quoted as a spread and in our E-mini index products that spread is generally as narrow as a 0.05 index value so it's a very, very tight market impact cost. It's not very large at all and that's by design because we want to encourage people to roll forward. So by entering the spread to sell the March and sell the June your position in March is completely offset while simultaneously a new open position is created in June. That's done by doing a calendar spread and if you've got any questions about that you should speak to your professionals at Tick Mill about that. It's done all the time at CME. Good stuff, thanks for clarifying that. And just one other quick question while we're talking contracts here. We have a question from Mev in the chat. Can we buy and sell futures at the same time? Also why when you have two positions it doesn't show you have two positions instead of just a single price? I'm not sure I understand the question because you can buy and sell at the same time. I'm not quite sure what I'm being asked. Also why when he's, I think what he's referring to is maybe a netting here. Also when, if you have two positions I guess your, do they show that your median fill as opposed to two individual fills? Oh, like if like, okay. If you exit, that's a question I think is best answered by the broker. Because you're gonna be, if you place the order and you're filled at a certain price that should show up on your price statement. Like if I try to buy two contracts of the micro E-minis and I get one at 39.28 and one at 39.28 and a quarter, I want two, but at two different prices. They should show up as individual prices on your P&S statement. But I'm not sure how that's done broker to broker. Okay, just another one here quickly. Is there any penalty if you do not close a position before expiring? Depends on the product I think. And in terms of a cash settled contract the answer would be, there's no penalty. You just have to, you'll be marked to the final settlement price. And if the previous day's price, let's say that you're a long one E-mini contract or one E-micro contract in this case. You go to expiration. Yesterday's level was at 39.27. The market settles at 39.28. You're gonna get a credit of one index point per contract from today's settlement versus yesterday's. Then the contract expires. Your position disappears. That cash credit is added to your balance in your account but you have no position in the futures market relative to that previous existing position. For a position with a physical settlement there could be some rather expensive consequences. For example, if you're long a treasury position and you were to be delivered a treasury security your account would be debited the full amount of that payment for that physical asset. In other words, you might have the margin for the futures position in place but at a physical expiration where there's a delivery mechanism you would be required to make payment in full for the entire asset. That's why so much of the open interest rolls forward. The intention of the commercial users has never been to take physical delivery unless they want to but is to maintain a position in the marketplace with reduced capital requirements. So you can see why the open interest tends to wanna roll forward or be offset prior to expiration. They don't wanna be bothered with it. Now there might be a reason to go to expiration that's a case-by-case basis and is subjective driven by the market user. Good stuff. Okay, if we proceed, I've got a bunch of other questions but we'll save those for the end. Okay. If we're gonna be considering these benchmark indices we have to know a little bit more about what they are. And this is as much a trading decision as deciding whether to go long or short because in many cases as you're gonna see in the next few minutes the choice of the equity index is as important as the trading decision itself. And in the case of the ones that we're considering today the S&P 500, the NASDAQ 100, the Russell 2000 and the Dow Jones, you'll notice that they sometimes have some similarities but they also have some distinctly different individual characteristics. The bigger ones, well, I'll start at the bottom. The granddaddy of them all is the Dow Jones industrial average which was created at the end of the 19th century. And is what's known as a price weighted average index of 30 large cap stocks in the industrial areas in the US or industrial companies in the US. So it's got a small compared to the other industries amount of constituent members. They tend to be industrial companies and the index is based on a price average. So ones that have a bigger price make up a bigger component of the valuation of the index that you see. That's the rarity. Let's move up a little bit. The Russell 2000 is a big, big index. 2000 companies go into the construction of that index but they tend to be small cap, small capitalization. The index itself, like the others that we're gonna consider above it are what are known as market capitalization indices. They take into account the price value of the shares of the companies in the index times the number of outstanding shares. So it takes into the event the capitalization of the companies, not just their prices. And the Russell is a big one, 2000 companies but they're smaller capitalization companies. The S&P 500, which is the biggest benchmark in the world for equities is also a market cap index of large cap stocks, 500 of the US's largest companies. That takes in roughly 80% of the entire US equity market capitalization. But because it's 500 companies, it's more diversified across 11 different industry groups and the top 10 companies represent roughly 27% of the total index. The NASDAQ 100, smaller number of constituents, only 100 versus 500 or 2000. Again, it's a market cap index of mostly large cap companies but they're the top 100 non-financial companies listed at the NASDAQ, the electronic stock market in New York. Their top 10 constituents and their mostly tech companies now represent roughly 54% of that index construction. This is important information because picking the index that you wanna trade is as much a trading decision as going long or short. Now, let's consider that in terms of what's taken place just in the last 18 to 24 months in the US stock market. If we start over and consider those four main indices again looking at from the last six months of 2019, a high level of correlation between all four of them, they're all up, they're all up a fair amount. Most of them very, very close together. The NASDAQ 100, certainly the best performer. Now let's jump into the year 2020. And as you all recall, the first quarter of that year was disastrous. The COVID-19 pandemic became around the world and markets sold off, the S&P sold off by 35% off of its all time high from February to March. And you can see even over that six month period it was still down by 3.2%. Notice that the Russell and the Dow Jones down much more severely, but again, the NASDAQ 100 in an inverse relationship sharply higher. So the choice of index here makes a big difference. Keep carrying it forward. Look at the next six months. In this case, market conditions have flipped. Recovery is in the air. The Russell 2000 now up 45% where the S&P is only up 20. The NASDAQ continued to perform well, but not as well as the small cap universe. And even from the beginning of this year to present, well, at least up until today anyway, the small caps have done considerably better than the broad market measured by the S&P and by the tech heavy NASDAQ 100. So these are gonna be some of the concepts we're gonna talk about. And I've got to move a little more quickly now out of respect for time. But when you're involved in buying and selling a futures contracts, this is how it works. Let's say that you buy one micro E-mini S&P 500 contract at 39 even, 39.00 index points. For the March, 2021 expiration, which will be that third Friday, the 19th of March, 2021. It has a $5 multiplier. So your notional equivalent is $19,500. Let's say that that initial margin is roughly $1,300 per contract. This is what CME would require from its clearing member for that contract. That's roughly 7% of that notional value. Now, your FCM may ask for more than that and they have every right to do so. In fact, they're being prudent because we're pulling money from them twice a day as we mark to market. They need to have enough money on deposit from the end customer to be able to support those. And since they will probably only be communicating with their client every 24 hours, we're communicating with the clearing firms every 12. So they've got a financial obligation to us that they sometimes need a little cushion for. So they've got the right to ask for more. You just need to know what that is. If the index goes up to 39.50, this account would be credited $5 times the 50 index points results in a $250 credit. Their credit balance is now $1,550. Everybody's happy. Clearing has the deposit they need. Broker has what they need. Customer has a credit. But what if the market goes down? It goes down by 50 index points to 38.50. Well, now we've got a situation because the same 50 index points at $5 a point has created a $250 loss in this account. And that $1,300 deposit is now down to $1,050, which is below maintenance margin requirements. So the FCM will be required to put additional money against this position to get it back to $1,300, or the position will be closed. Now they will, by most terms, already have that money on deposit and will be made good on that position. But what you can see here is that as the market moves up and down, the customer is responsible to maintain enough cash in their trading account to be able to maintain whatever the margin is on that open position, or they have to offset the trade. Now let's talk about some trading strategies. We're gonna consider something known as a spread trade. I talked about spread trading as referred to the role of moving forward. That's known as a calendar spread. Now we're gonna talk about what we sometimes call inter-commodity spreads, trading one index product against another. And a spread in my world is the simultaneous purchase and sale of two highly correlated products. This is done because there's a tactical or strategic relationship between the products that could be best displayed through what's known as a relative value trade. In other words, I put on a spread trade when I want less directional risk, but wanna take advantage of this relative value relationship between these two products. Let me give you an example. What you're looking at on these charts are the E-mini S&P 500s from the March contract compared to the E-mini NASDAQ 100s on the left side of the screen. And the E-mini S&Ps compared to the Russell 2000 futures on the right side of the screen. Notice the high level of price correlation between these index products. It's above 90%. They trade in very similar patterns because they're all stock indices. But even though they're highly correlated, there still is price difference between the two and enough price difference between the two that someone may decide that there's a relative value trade to be had by selling one and buying the other. In other words, you're not taking as much directional risk. You're taking the risk of the difference between the index products themselves. And to trade a spread like this, you construct a spread ratio based on the notional values of the respective contracts. So you go back to that concept we talked about earlier. How do you get the notional equivalent? It's the index price times its fixed multiplier. So if we take the index value of the NASDAQ at $13,192 and multiply it times $2, which is the multiplier for the micro and divide it by the notional value of the micro S&P, you get a ratio of 1.36. Well, you can't trade fractional contracts. So you have to either round it down to one to one or come to some whole number equivalent like four to three. What I've done in this illustration is done at one to one. The blue line shows you the S&P 500 just like it did in the previous slide. Market goes up, market goes down, market goes sideways. It seems that if you track the spread, which is the yellow line, even when the market traded down, the spread performed well. When the market traded up, the market, the spread traded well. There were a few cases where the spread didn't do so well, but overall this spread performed admirably. And what that's telling us is the NASDAQ 100 outperformed the S&P in relative terms. They might have both been down on one day. They might have both been up one day, but when they were down, the NASDAQ tended to be down less than the S&P. When they were up, the NASDAQ tended to go up higher than the S&P. It's a relative value trade and that's what spread trades are designed to capture. You could do the same thing relative to the Russell 2000 and compare large caps to small caps. Same thing, divide the Russell into the S&P. And again, you'll see a slightly different graphic depiction because the Russell lagged the S&P for most of this last year until March. And in March, it took off as a spread. For the second, for the fourth quarter of this year in the beginning of this calendar year, the Russell 2000 index has outperformed the S&P 500 index. So a spread trade that was long to Russell futures and short one S&P future would have done admirably whether the market went up or down that relationship that relative value relationship performed well. Another example of relative value trading is with products known as select sector futures. The S&P 500 has been cut into 11 sub-sectors on which there are ETFs that you can trade. There are futures contracts that you can trade on the sub-sectors of the S&P 500 and you can see them all listed here. They act just like equity index products. They have an index value and a fixed multiplier and these are, we don't have micros on these, just E-minis. So you can see the notional values in the far right column. I'm gonna suggest we consider doing a spread between sectors with the idea, and again, this isn't a trading recommendation. This is purely for educational development. But there were times where large asset managers do these sector rotation strategies. Historically, they've had to actually move their portfolios. They sell shares of certain industries and they buy shares of the other to reweight the total portfolio based on where they think the market is in a business cycle. As you're going into a recession, you wanna be out of cyclical shares and into what are known as defensive shares like utilities, consumer staples. And as you're coming out of a recession into a growth market, you wanna rotate back into those cyclicals like energy, financial, materials, industrials and away from the defensive ones like utilities and consumer staples. So depending on where you believe we are in a business cycle or in a trading cycle, there could be advantages to doing spreads one sector against another. And what I'm gonna suggest we look at is a trade buying financials, selling utilities because of the expectation of the fact that the US economy might be going into a recovery stage. If we go back to the 18th of February, you would construct a spread trade just like we did with those indexes. Get the notional equivalent of the contract by taking its index value times its multiplier, divide in this case, the financials into the utility index and get a ratio of 1.33. So I need 1.33 financials for every one utility. In this case, I'm gonna round four to three buying four financials, selling three utilities. About five trading sessions later, the markets have moved. You can see that the financials were up by a little more than 50 points index points. The utilities actually fell by 23. This would have been a very advantageous example of a relative value spread because both legs worked. I was long financials, they went up, short utilities, they went down resulting in this gain. Now both of these positions would have required margining. So you would have had to put up capital to secure open positions in both, but it would have been in relative terms a lower risk trade because while they're not as highly correlated as the broad market index, they do enjoy a slight degree of correlation and the outright market risk would have been less. So these are ways to express a point of view that isn't just long short. They refer to the relative difference between various products and it may be a trading strategy that you might want to employ or consider in your own personal trading. In addition to the micro E-mini contracts, CME lists as micros on three of our metals products and one, two, three, four, five, six, seven of our FX futures. You might want to explore the use of micro trading in these products as well. With that, Patrick, I'm going to kick it back to you. That concludes my formal remarks, but I'm happy to stay with us for five or 10 minutes if you've got any questions that I might be able to answer. Excellent, David, excellent. Okay, I'll rattle through a few of the ones that I've held back because I thought you'd be best for us to cover them off. Liquidity during a contract period. I know from my experience, we tend to see better liquidity during the cash market period of the underlying. So personally, the majority of my trading has been in the E-mini S&P, the E-mini Nasdaq, et cetera. But my understanding is Globex, we tend to see a reduction in liquidity. And then when the cash session starts in the US, we see a pickup in liquidity, is that correct? Well, it is in general terms. I will say, particularly with respect to the E-mini S&P 500, that may not be the case. In fact, over the last, let's say five to seven years, the period where we've had the most trading activity, in other words, our biggest volume days in that product, we've had over 50% of that volume take place in what's known as overnight trading hours because the events that have caused the volatility took place after the cash market closed and before it opened. I'll give you probably the most famous example was the US presidential election of 2016. And in that November of 2016, when Donald Trump was surprisingly elected president, we had a massive amount of trading and it took place after nine o'clock Chicago time because that was when the West Coast closed its polls and it became clear that there was an upset. We did record volume that day and 55% of it took place between nine o'clock in the evening and before eight o'clock the following morning. So with like the E-mini S&Ps, it is virtually a 23 hour a day marketplace. Some of the less liquid products, yes, you're right, Patrick, the volume tends to fall off when the cash market's closed. But depending on where you are and depending on what's going on, you might find very, very good liquidity. For example, with the FX products, FX, the center of FX is London. So the real foreign exchange market really begins with the London open and our futures contracts tend to follow the underlying marketplace. So you'll find a lot of activity in our FX contracts during European trading hours. There are certain products like the Japanese Yen or the Australian dollar that will trade more heavily during Asian time periods. So it depends on the product, depends on the market, depends on market conditions. Right, another good question here from Kev. Can I get access to depth of market in futures? And does that give clarity or a read on the overall view of bulls and bears? Depth of book can be shown. It depends on where you're getting your data, who's providing you with your data feed. CME does provide depth of book at least five locations bid and offer and in many cases, as far back as 10. I'm only familiar with our CME direct trading platform and I know I can go back to 10 steps in both bids and offers to see market depth. But the short answer to that is yes, you can, it depends on who the carrier is. Good stuff. Any possibility of knowing the letter corresponding to the months across the year as you referenced March being aged? That's funny because I took that slide out of the deck. This is actually more anecdotal but the short answer is yes. And if you look at a normal keyboard, this will become rather obvious and intuitive for you. The letters that correspond with the months, if you look at a normal keyboard and you think about them in terms of 70, 80 years ago when these things were designed, we didn't have computers. We didn't do things electronically. The teletext was the way to do stuff or actually pounding in key punch cards. So the letters that correspond with the months, F begins the year for January, then G for February, H for March, J for April, K for May, M for June, N for July, Q for August, September becomes U, October is V, X is November and Z is December. You'll notice there's no O and there's no I because they look too much like numbers. But if you look at a keyboard, you'll see they all fit right in the middle and that was designed to speed input back in the old key punch days. Very good question. Thanks for bringing it up. Thank you, is there a leading index or a lagging index relationship amongst the major benchmarks? That's more of a subjective answer. Every market practitioner develops their own sense of what data is important to them. Do certain things have systemic influence? Yes, interest rates, changes in interest rates will, if you're watching the market today, you can see the impact. Rising rates in the US, particularly on the long end of the curve are finally catching up and having a negative impact on equity index valuations or at least the expected forward index valuations. So generally interest rates have an impact on equities when there's perceived big market moves. Other things like economic conditions like employment, the non-farm payroll number continues to be a big number, the first Friday of every month, GDP is considered a big number. Right now it's things like unemployment claims, housing information, but in terms of other things, it could be something that you don't expect, like if there was a resurgence in COVID infections, it could have a very detrimental effect because of the impact on future economic activity. So there's never a silver bullet that fits every situation all the time. These are situational and they're also somewhat personalized. Certain traders have certain things that they like to watch that they rely on. That is part of your own developing trading strategy. Good stuff. Look, last but not least, David, we won't keep you any longer. If contracts are cash settled, why not just have a daily rolling product and get rid of the course of the explanation? Wow, because it wouldn't develop any open interest would be my short answer. And that's because I come from the commercial space. The idea behind large institutional users using our marketplaces, they want a standardized contract that fills up with large open interest because open interest represents potential energy or future transactional business. And that's where not every exchange is created equal or every contract is equal. When I look at futures products for their health or what I would call to a healthy contract, it not only has good average daily trading volume but it also has deep open interest because that tells me that I can get into the product but it more importantly, it tells me I can get out and getting out sometimes is more important than getting in. The other thing I like to see is a diversified degree of users. And I look for things like the Commitment of Traders Report to find that information. We have to report who holds the open interest in our products. So when I go to the Commitment of Traders Report at the CFTC, it breaks financial products down by asset owners, leveraged funds, broker dealers and others. And if I see a good healthy distribution of the holders long and short of the open interest, it gives me a greater level of comfort of knowing the market in that product is not dominated by one particular market user. I hope that it's kind of a backhanded way of answering the question. We've never had a daily product. I suppose there are probably some exchanges to do but I'm not familiar with how they work. We like the longer dated explorations because it develops more open interest and attracts more commercial users. Good stuff, that seems clear to me. Are there any other questions that we just see here? Steph asks, the price changes every day. Is that for any futures contract which people want to get out the contract before the end of the quarter? Yes, Steph, price fluctuates on every financial instrument pretty much every day. So I don't think that's anything specifically related to the fact that people want to exit the position by the end of the quarter. But they're marked to market for settlement purposes once a day and that's the number by which your profit and loss is established. Yeah, good stuff. All right, the last little piece that I have, Patrick, is if any of your attendees are interested in learning more about CME, I'm gonna point them to CME Interstit which is our educational portal. It's available as a dropdown on our website, cme.com. You can learn lots of stuff there. And then lastly, I'll close out by providing information. If you've got more questions about our products by all means reach out to our friends at TickMill. This is their contact information, their website. They make for great partners. So specific questions about opening accounts, any more specifics about the products, feel free to reach out to them directly because they will be reaching out to us. With that, I will thank you for your incredible patience over the last hour and some change and wish you all the very best of luck. Thanks very much, have a good evening, everyone. Cheers.