In 2023, the average daily volume (ADV) of E-mini Equity options surpassed a record 1.3 million contracts and more than 200K contracts were traded before the U.S. market open. Non-U.S. hours options volume at CME Group has seen remarkable growth over the past few years as the company  has built the S&P 500 options ecosystem in Asia and Europe, and introduced several product enhancements to the marketplace. E-mini S&P 500 options ADV during non-U.S. hours has grown more than 300% since 2017 with a CAGR of 28%. The liquidity pool spanning from zero-day options out to five years on the curve does not disappear after the U.S. market close, and this continuity makes CME Group a unique place to trade listed S&P 500 options.

In many cases, investors in Asia and Europe have worldwide allocations of their assets. The substantial liquidity pool of U.S. Equity Index products in their time zones allows clients to effectively manage unexpected market risk. For investors based in the U.S., having significant liquidity outside of cash hours provides an ability to hedge any overnight risk or take advantage of new opportunities whenever news breaks. For example, during the retail banking crisis in March this year, more than 686K of E-mini S&P 500 options contracts were traded in non-U.S. trading hours at CME Group as markets reacted to the news around Silicon Valley Bank and the emergency measures announced by the U.S regulators overnight. Similarly, on the night that Russia invaded Ukraine in February 2022, nearly 560K E-mini S&P 500 options contracts traded at CME Group before the U.S. cash equity market opened.

S&P 500 Index is widely used as a proxy for many of Asian and European Equity Indices. The ability to trade E-mini S&P 500 options without a material price impact outside of U.S. cash hours, while preserving capital efficiency via portfolio margining with futures listed on CME Group, can help to facilitate cross-hedging opportunities against local benchmark indices. From an implementation perspective, investors in Asia and Europe can easily achieve the desired outcome via the central limit orderbook (CLOB) on CME Globex or the off-screen block market in their own time zones.^[2]

CME Globex is the primary trading venue where the traders can leverage CLOB liquidity around the clock. The average cost to cross the B/A spread on top of the book for E-mini S&P 500 options during non-U.S. hours is not materially different from the regular market hours. According to analysis by One Market Data, the fill ratio outside of U.S. hours to trade 10 At-The -Money straddles is 95% with an average market width of 0.71 index points, which is tighter than the corresponding ETF or cash index options.^[3] Another unique functionality supporting the strong liquidity on Globex is Request for Quote (RFQ), where participants can create User Defined Spread (UDS) as a tradable instrument. Traders can execute multi-leg options strategies up to 40 legs as a single instrument without paying the B/A spread for multiple transactions. The RFQ functionality complements the screen liquidity and allows investors to source potential price improvements

For a large clip size of more than 100 contracts, CME Group offers a unique, low cost, and highly capital-efficient solution where a trade can be privately negotiated as a block trade with zero break-up risk. Delta can be covered with E-mini S&P 500 futures being included as part of the option block, then centrally cleared with the benefit of margin offset between the futures and options. A healthy block market ecosystem has evolved around the clock, supported by market makers, banks, and inter-dealer brokers across regions.[4] E-mini S&P 500 options blocks traded more than 100K contracts per day in Q3 2023, up 35% from a year ago. The growth is more remarkable during non-U.S. hours, up 66% in Q3 2023 compared to a year ago.

A fine grid of options expirations provides flexibility to structure the trade to fit the need as required. This becomes more attractive when there is sufficient liquidity across the curve and around the clock. Non-U.S. hours volume at CME Group has significantly grown in recent few years tracking approximately 16-18% of total volume. Below are a few use cases of how some buy-side clients could employ static or dynamic hedging strategies using E-mini S&P 500 options in their time zones. 

Portfolio managers in Europe and Asia often have a conditional rebalancing mandate for their global asset allocation, typically between equity and fixed income investments. If the ratio between the two departs from their desired mix, the managers will have to restore the ratio through rebalancing, which can be tactically achieved by using E-mini S&P 500 options for the U.S. equity component. For instance, they may consider to write strangles at any time of the day, either through RFQ or a bilaterally negotiated block at CME Group to minimize any slippage risk.^[5]

Some pensions in Europe and Asia have a minimum distribution guarantee in their products. If this includes U.S. equities, they can run a dynamic hedging program with a tail risk overlay using E-mini S&P 500 options. The pension may also use variance swaps, which gives them convexity. In this case, they may choose to execute a complex series of puts and calls, and execute any required delta hedging whenever the market moves, all of which can be easily accomplished by CME Group’s near 24-hour liquidity offering. Insurance companies can also consider using options to manage a guaranteed scheme embedded in their products such as a variable annuity. They can cover their portfolio’s Greeks in a cost-efficient way by layering in options at any time of the day, rather than hedging with a linear product, which only manages the delta.

The strong non-U.S. hours liquidity plays a vital role to the large structured-product market in Asia and in Europe, such as auto-callable notes. They are highly popular in Japan (Uridashi) and Korea (ELS) providing an opportunity to retail and institutional investors to receive a high yield.^[6] The S&P 500 Index is one of the major indices often employed in the note construction, alongside with local benchmark Equity Indices, such as Nikkei225 and KOSPI200. E-mini S&P 500 options are responding to the issuers’ needs with an unmatched liquidity pool, when the issuers seek to hedge their positions using the corresponding futures and options in their time zone. A well-established broker dealer market and the pricing ability of market makers are supporting both the screen and the block market at CME group, during non-U.S. hours.

The Equity Index options market has significantly grown over the last few years and E-mini S&P 500 options volume at CME Group is on course to set another record in 2023. Despite the lower volatility environment, E-mini S&P 500 options recently achieved record monthly ADV of more than 1.8M contracts with a substantial portion of the volume coming from outside of U.S. cash equity hours.^[7] In today’s complex, highly uncertain yet interconnected global markets, the ability to manage risk in real time and take advantage of the liquidity has become critically important. As the largest financial derivatives exchange in the world, CME Group provides an unmatched liquidity pool outside of U.S. regular market hours through E-mini S&P 500 options, helping investors to tailor their investment strategies and effectively manage risk regardless of time zone.

1. Non-U.S. Trading Hours are 5:00 p.m. – 8:00 a.m. CT / 6:00 p.m. – 9:00 p.m. HK & SG Time.
2. For more information, visit www.cmegroup.com/equityoptionsblocks.
3. The data period is since August 2023.
4. E-mini S&P 500, Nasdaq-100, and Russell 2000 options Block Liquidity Providers List is available on the web,
5. Selling call options at higher strike and selling put options at lower strike that have the same expiration, the portfolio will benefit from the premium if the market falls between the two strike prices (index prices) at expiration,
6. Typical design of auto-callable notes is, investors receive high yield if the underlying indices are above the coupon strike on any observation date, usually every six months. Or receive the principal if the note is knocked out early or at maturity so long as the underlying indices have never touched the knock-in barrier.
7. E-mini S&P 500 options ADV surpassed 1.8M contracts in October 2023, up 20% from the previous month.