Money managers have just seven weeks left to tackle the move of Russell 2000 futures contracts, built on the U.S. small-capitalization index, to ICE Futures U.S. in New York from CME Group Inc., Chicago.
Although the unique migration was announced more than a year ago, technical difficulties related to closing positions on one exchange and reopening them on another have led investors to delay action and stay on the CME for as long as possible. Open interest, a gauge of future trading, remains concentrated on the CME by a factor of 12-to-1, although the contract will no longer be listed there after Sept. 19.
In June 2007, index-maker Russell Investments, Tacoma, Wash., sealed an agreement with IntercontinentalExchange Inc., Atlanta, the parent of ICE Futures U.S., to exclusively list contracts based on all Russell indexes — including the popular 2000 — on the New York market. Money managers use Russell 2000 futures to hedge their small-cap holdings or to gain exposure to the small-cap universe.
“You could do a long "roll' at the ICE exchange, which will offset your CME positions, by buying a December contract and selling a September contract on ICE. It's fine for exposure, but for us, being both long and short requires a lot of explaining (to our clients),” said Timothy Misik, head of institutional trading in New York for Chicago-based Northern Trust Global Investments, with $751 billion in assets under management.