Futures get a fresh look: An introduction to Spot-Quoted futures
Spot-Quoted futures (SQFs) offer a new way to access the futures market. Historically, some investors considering a futures position on an underlying index or cryptocurrency have had questions on the all-in cost of a futures contract, due to the difference between the futures’ quoted price and the spot price of the underlying at any point in time. SQFs solve this problem by explicitly showing how the spot price is affected by financing adjustments, as opposed to traditional futures contracts which include this component in the quoted price.
With SQFs, traders can enter a futures position at the current spot price. When closing the position, the final profit or loss might differ slightly due to financing adjustments made during the clearing process.
A few key benefits include:
- Smaller notionally sized futures contracts compared to other Equity Index and Cryptocurrency futures
- Longer-dated contracts, removing the need to roll on a monthly or quarterly basis
- Trading on a CFTC-regulated market that provides near-24 hour liquidity across major benchmark products
- Initial margins as low as $100 (subject to change)
How Spot-Quoted futures work
When a trader negotiates an SQF trade, it will be priced at the spot price, or index, level. This means the price that traders see on-screen (CNBC, Yahoo, etc.) is the index level that will be quoted – and ultimately traded – in Spot-Quoted futures.
Given the product is a futures contract, a total financing component is required. In SQFs, this is known as the total financing adjustment.
How to price a Spot-Quoted futures contract
The combination of these two components becomes the cleared futures price:
Spot-equivalent Price + Total Financing Adjustment = Cleared SQF Position Price
It's important to note:
- If a trader holds their position overnight (or more than one clearing cycle), the change in the total financing adjustment will impact profit and loss (PnL)
- For traders who trade in and out of their position within a single trading day, the difference in spot prices executed will be the total PnL
Trading examples
In the following examples, we look at two scenarios: 1) where a trader enters and exits their position within a single day and 2) where the trader holds their position overnight.
Example 1
Participants will trade in and out of their Spot-Quoted S&P 500 futures (QSPX) position in the same trading day.
Activity 1) Trader A buys 1 QSPX at 5840.00 (spot-equivalent price) at 9:30 a.m. CT on Jan. 14, 2025
Activity 2) Trader A sells 1 QSPX at 5855.00 (spot-equivalent price) at 12:00 p.m. CT on Jan. 14, 2025
Total Financing Adjustment was determined to be (9.00) for Jan. 14, 2025.
At the close of business (where Spot-Equivalent Level + Total Financing Adjustment = Cleared SQF Position Price):
Activity 1) Long 1 QSPX at 5840.00 + -9.00 = 5831.00
Activity 2) Short 1 QSPX at 5855.00 + -9.00 = 5846.00
= 5846.00 - 5831.00
= 15 index points of positive PnL ($15.00 in profit due to $1.00 contract multiplier for QSPX, more details in the appendix)
Example 2
Participant will trade in and out of their Spot-Quoted S&P 500 futures (QSPX) position over a two-day window:
Activity 1) Trader A buys 1 QSPX at 5840.00 (spot-equivalent price) at 9:30 a.m. CT on Jan. 14, 2025
Activity 2) Trader A sells 1 QSPX at 5855.00 (spot=equivalent price) at 12:00 p.m. CT on Jan. 15, 2025
Total Financing Adjustment was determined to be -9.00 for Jan. 14. 2025
Total Financing Adjustment was determined to be -9.50 for Jan. 15, 2025
At the close of business (remember Spot-equivalent Level + Total Financing Adjustment = Cleared SQF Position Price):
Activity 1) Long 1 QSPX at 5840.00 + -9.00 = 5831.00
Activity 2) Short 1 QSPX at 5855.00 + -9.50 = 5845.50
= 5845.50 - 5831.00
= 14.50 index points of positive PnL ($14.50 in profit due to $1.00 contract multiplier for QSPX; more details in the appendix)
Appendix
Get additional clarification on each of the unique components of the Spot-Quoted futures below.
Spot price
The spot price is the price that will be quoted and traded on-screen by the individual trader.
Total financing adjustment
It is important to understand the total financing adjustment:
- This innovative pricing mechanism, which is embedded into the cleared futures position, allows traders to execute at the spot index level:
- It is not an explicit separate finance charge outside of the product pay off
- It is not an interest rate charge
- This removes the futures index price to spot index price differential (also known as the futures basis)
- For each futures contract, one total financing adjustment number is determined for each trading day and added to all Spot-Quoted futures traded on that day:
- For example, if the total financing adjustment for QSPX was determined to be -10.00 on Feb. 5, 2025, and Trader A traded a spot level of 6000.00 at 12:00 p.m. CT, at the close of business, the cleared futures position would be 5990.00.
- For traders who are trading intraday, the total financing adjustment will have no impact on PnL. The total financing adjustment will be equal for any trades occurring on the same day, thus not relevant to your PnL.
- For traders who hold their position longer than intraday, the change in total financing adjustment between the dates they enter and exit the trade will impact their PnL
The total financing adjustment level is historical since the launch of the product. At launch, the total financing adjustment started at 0.
Each day, the total financing adjustment will be determined by looking at the change in the basis (futures settlement - cash settlement) and adding that to the previous day’s total financing adjustment.
Using the following table as an example, let’s walk through how the total financing adjustment is calculated. Assume our Spot-Quoted futures were launched on Jan. 1, 2025, and the total financing adjustment was 0 at launch.
| Date | ES futures Settlement | S&P 500 official cash index closing level | Basis (futures - cash) | Daily financing adjustment | Total financing adjustment |
|---|---|---|---|---|---|
| 1/14/2025 | 5882.25 | 5842.00 | 40.25 | 1.75 | -9.00 |
| 1/15/2025 | 5989.00 | 5950.00 | 39.00 | (1.25) | -10.25 |
| 1/16/2025 | 5975.50 | 5937.25 | 38.25 | (0.75) | -11.00 |
Key
| ES futures settlement | Settlement price for front-month E-mini S&P 500 futures |
| S&P 500 official cash index closing level | S&P 500 settlement price |
| Basis | Difference in futures settlement minus cash settlement |
| Daily financing adjustment | Calculated by comparing the change in the basis day-over-day |
| Total financing adjustment | Sum of daily financing adjustment since launch |
It is important to understand that the total financing adjustment level can change day by day depending on market dynamics and the change in the basis. (link to Educational video on the basis). The change in total financing adjustment from one day to the next is based on how the basis changes from one day to the next. This means on any given day, the total financing adjustment could be a positive or negative number.
CME Group calculates this number daily using liquid markets, and it is explicitly marked as the values indicate. There is no “premium” or extra line items included in this calculation, and CME Group will rely on real-life markets to determine this level daily.
Cleared futures position
To summarize, ~30 minutes after the settlement of the respective cash index, CME Group will provide the official Spot-Quoted futures cleared futures position:
Spot-equivalent Level + Total Financing Adjustment = Cleared SQF Position Price
Product set
The following indices will be available initially for trading as Spot-Quoted futures. Details include the contract multiplier and notional size of the contract (as of March 31, 2025):
| Contract | Multiplier | Spot-Quoted notional size |
|---|---|---|
| S&P 500 (QSPX) | $1 x Index | $5,600 |
| Nasdaq-100 (QNDX) | $0.10 x Index | $1,900 |
| Russell 2000 (QRTY) | $1 x Index | $2,000 |
| Dow Jones (QDOW) | $0.10 x Index | $4,200 |
| Bitcoin (QBTC) | 0.01 bitcoin | $850 |
| Ether (QETH) | 0.20 ether | $400 |
For more information on Spot-Quoted futures, visit these helpful links:
Spot-Quoted futures launch June 30*
Explore a fresh approach to equity and crypto markets with small-sized, long-dated contracts designed to trade at the spot price.
*Pending regulatory review
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
