Futures contracts, or simply futures, are exchange traded derivatives. The Sydney Futures Exchange (SFE) - now part of the Australian Securities Exchange (ASX) - acts as counterparty on all contracts, sets margin requirements etc. Additionally many
CFD direct market access and market maker providers offer CFDs on the Futures and it is best to discuss the terms directly with the provider.
A futures contract is a standardised contract, to buy or sell a certain underlying instrument at a certain date in the future, at a set price specified on the last trading date. The future date is called the delivery date or final settlement date. The set price is called the delivery price or settlement price.
A futures contract gives the holder the right and the obligation to buy or sell. Contrast this with an
Options contract, which gives the buyer the right, but not the obligation, and the writer (seller) the obligation, but not the right. In other words, an option buyer can choose not to exercise when it would be uneconomical for him. The holder of a futures contract and the writer of an option, do not have a choice. To exit the commitment, the holder of a futures position has to sell his long position or buy back his short position, effectively closing the position.
The SPI futures are an important financial instrument as the increasing trend of cash equitisation by domestic fund managers combined with greater off-shore usage of SPI futures contracts by hedge funds and proprietary trading desks has added considerable momentum to the growth in the SPI. Total volumes in the SFE SPI 200
index Future in 2005 were up 22% from the comparable period in the previous year with 163,000 contracts traded in just one day in September 2005.
Normal trading hours for the SPI Futures contract are 9.50 a.m. - 4.30 p.m. and this is when the contract is most
liquid. However, the SPI Futures also has a night market that enables traders to open or exit positions according to overseas market conditions. The night market opens at 5.10 p.m (before the UK Footsie opens) and closes the next morning at 7.00 a.m. (covering the close of the US Dow Jones).
The settlement price of SFE's index contract is calculated on the basis of a Special Opening Quotation of the S & P ASX 200 Index price on the last trading day of the quarter, the Index price is calculated on the first traded price of each component stock on the expiry day.
The SFE index contract trades up until midday and the SFE (now the ASX)
should publish information every half hour from 10.30am until the close of trading on the expiry day, giving an indicative Index price and identifying the market capitalisation percentage of the Index stock which have traded up to that point.