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- [00:00]
Ben Carlson
Today's Animal Spirits Talk. Your book is brought to you by the CME Group. Go to cmegroup.com to learn more about all of their different tools for trading futures and retail education@cmegroup.com.
- [00:15]
Michael Batnik
Welcome to Animal Spirits, a show about markets, life and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ritholz Wealth Management. This podcast is for information purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.
- [00:45]
Craig Buick
Welcome to Animal Spirits with Michael and Ben. On today's show we are joined by Craig Buick. Craig is the head of Retail education at the CME Group and this is the first time I'm going to talk your book that I'm talking my book because I am a shareholder in the stock because there is a massive tailwind, you could call it secular. This is a super duper growth story. The rise of the retail trader, which is not brand, brand new, but we talk about this all the time.
- [01:11]
Ben Carlson
How long have you on this stock for?
- [01:13]
Craig Buick
I'm a recent shareholder probably like two months because it just went up every single day and I just needed some sort of a pullback to get it and I got it and I got long. But they've been talking about this on their earnings calls. They get asked all the time because it is such a, such a big story of their growth, which is retail participation. And I don't think this is going to go away in a bear market. I don't think that people are going to stop using futures, whether it's for leverage purposes, which can be fun and exciting and let's just call it what it is, that's real. And then there's also more practical purposes such as hedging. We speak about that on the show. If you've got a portfolio that you're not really interested in and turning over for taxes reasons, you're a long term shareholder, whatever. But you do think that like, all right, maybe markets have gone straight up and I want to just, you know, protect my portfolio, just buy some insurance. This is a way to do it. And yeah, it's here to stay.
- [02:10]
Ben Carlson
So I didn't realize this. This stock was only down like 8 and a half percent in the April swoon where the market was down 20 and a bunch of other stocks were down 30, 40, 50%. In some cases this this stock was like a hedge against the Liberation Day sell off.
- [02:26]
Craig Buick
I wish I owned it then.
- [02:27]
Ben Carlson
So you're banking on the retail trading explosion continuing? Because we've mentioned the Barron's story before. I think we mentioned on the show just the explosion in futures trading by retail traders and how Barron's was kind of like, I can't believe this. So we talked to Craig about that.
- [02:40]
Craig Buick
Why can't. This is not a flash in the pan.
- [02:43]
Ben Carlson
No, it's here to stay. Yeah, so we talked to Craig about all that stuff. We talked about how they do their education for retail traders, how futures contracts work. Michael's mind was blown by the amount of leverage you can take in these contracts. So here's our talk with Craig from CME Group.
- [03:04]
Craig Buick
Craig, welcome to the show.
- [03:05]
Michael Batnik
Thanks. Pleasure to be here.
- [03:07]
Craig Buick
All right, so you guys reported your second quarter earnings report a couple of weeks ago. Why do I know that? I'm a shareholder. So this might be the first time that we've had the situation of talk your book that I'm a shareholder of the company. And, and one of the things that jumped out to me was the retail trader component as a tailwind to your success. So during the second quarter, CME reported that more than 90,000 retail traders, a 56% year over year increase, traded futures for the first time. The fifth consecutive quarter of double digit growth. Spy's not good enough. We gotta trade futures. Why are people. So why are people so into traded futures? What is the appeal of a futures contract for a retail trader?
- [03:53]
Michael Batnik
Yeah, and it's a great question. And certainly I think our success and sort of the rise of retail futures trading has been well documented both in that earnings call and even if you go back to some of the previous ones, it's not a sudden thing. Right. This has been a trend. And some of that is just our increased distribution too. Right. We continue to add distribution partners, big broker dealers. I know. You know, some of that's been well documented in the press as well. We've had some high profile broker dealers begin to offer futures, which just increases the accessibility of them. But why, you know, and I don't think it's a case of spy's not good enough. Right. But there are some, some differences in futures, some characteristics I think that do make them appealing to both institutions and individual traders alike. And some of those are the inherent capital efficiencies. Right. And those apply to both institutions, but also to individual traders. And what I mean by that is that to hold a position, for example, in the S&P 500 since you mentioned the spy, you only have to put up a performance, what we call a margin or performance bond in a fraction of what your actual notional exposure is. So to hold a relatively large position, the amount of money that an individual has to put up, it's much less than what you typically would. In, for example, the securities markets, in a lot of cases, they're also open around the clock. Right. So our futures markets, most of our futures markets open at 5pm on Sunday, Chicago time, and they're essentially open 23 hours a day until 4pm on Friday. So I think traders really like that ability to get at their position anytime, day or night. Some other things is the ability to go short. Right. So if you're trading spiders, you've got low. If you want to get short in a lot of securities markets, you've got a low. You've got low key requirements that you have to perform. There's borrow costs and things like that. With futures, if you want to be short the market, you simply sell it. If you want to get long, you buy it. And it's really that simple. And then if you have less than $25,000 in your account pattern, day trading rules don't apply to futures as well.
- [06:04]
Ben Carlson
So I want to get more into the different dynamics of trading futures and maybe compare and contrast with options. But getting back to the retail component, Barron's had a piece on CME Group recently and they said that you're starting to attract retail investors, something long thought to be nearly impossible in the futures market. And they're making it sound like it's this crazy thing. Did you have a bunch of retail investors show interest or was this, was this an initiative within the firm that you said? No, we really want to target this cohort of people who is showing interest in wanting to be involved in these different sort of strategies.
- [06:38]
Michael Batnik
Yeah, I think, you know, and just to sort of set the tone a little bit, futures trading by individuals isn't brand new. Right. Even if you go all the way back to before the proliferation of online trading in the late 90s, there were futures brokers that were selling to individuals just like there were stockbrokers. So it's not like it's a brand new phenomenon. But as I said before, what's really kind of led to some of the large increases that we have is the increased accessibility of futures. So broker dealers started offering futures along with stocks to individuals. We really saw that take a jump up with all of retail trading really during the pandemic in 2020 I think the increase in retail trading across all asset classes, stocks and back then cryptocurrencies and then also futures really started to explode. And some of it that I think was the introduction of more retail specific products like the micro equity indexes that we launched in 2019. So I think it's, it wasn't necessarily a decision. I mean, certainly CME is committed to offering retail, retail appropriate products like the micros. And, and that's led to a lot of the increase that we've seen. So I think that's, you know, and I can't remember exactly what your question was now, but, but that's, it wasn't really a decision as much as we provided the products that retail traders could appropriately use. And then we saw an increase from that.
- [08:17]
Craig Buick
How do you define retail? Is it a certain dollar amount? Is it coming from like, you know, if somebody's from Robinhood, they're a retail trader. Like how do you categorize retail traders?
- [08:24]
Michael Batnik
Yeah, it's, you know, technically I think the technical definition that we use is an individual trading his or her own account, what we call non member rates. Right. So at CME there's a different fee schedule if you're a member or a non member. So that's pretty clear definition of a retail trader.
- [08:46]
Craig Buick
All right, so maybe let's start at the highest level. What is a futures contract and how does it work?
- [08:53]
Michael Batnik
Yeah, it's a great question. And it's the first slide in the Futures 101 deck that I present a lot. And quite simply, a futures contract is simply a contract to buy or sell something, whether it's the NASDAQ 100 or WTI Gold or WTI Crude oil or Gold at some point in the future. But I think maybe the easiest way to describe it is to contrast it with what people might be more familiar with, which is like an equity. So if you buy a share of Apple, you own, albeit a small part of the company. With futures, it does not convey a right of ownership or voting rights or anything like that. It's simply a contract to buy or sell some asset at some point in the future.
- [09:34]
Craig Buick
All right, so one of the key features as you alluded to is capital efficiency. I'll call it leverage. So how does that work? Like, obviously this is one of the key elements is that you can get a lot for a little, but there's margin requirements, there's all sorts of things. So how does it practically work? What do you get? Talk about a margin call. I know there's a million different things to unpack here, but maybe let's start there.
- [10:00]
Michael Batnik
Sure. And you're absolutely right. The other way to say capital efficiency is inherent leverage. Futures are an inherently leveraged product. And the difference, I guess because use the word margin and I want to be clear about the two different contexts in which someone might hear the word margin. So in, in the equities world or the securities world, a margin, if you're trading stocks on margin, that amount that you're not putting up. So for example, if you trade again, let's take Apple on margin, and you have $1,000 worth of Apple, you might trade it on margin and put up half of that or $500. The balance of that $500 is technically a loan from your broker. In the futures world, we use the same word margin, but it's in the context of a performance bond. So instead of a loan, that margin is really the amount that you're putting up to hold. It's a good faith deposit to hold a position. And whereas in the securities world, under what they call reg T requirements, oftentimes someone has to put up at least 50% of the position they're holding, in futures, it's a fraction of that. So if you look at like the S and P or the NASDAQ futures, it's generally going to be around 4 to 6% of the position you're holding. So.
- [11:21]
Craig Buick
Oh my.
- [11:24]
Michael Batnik
And then that's a double edged sword. Right. But, but in the, in the micro NASDAQ, which, you know, at today's prices is nearly a $50,000 notional exposure, with one micro NASDAQ contract, the amount that you'd have to put up is only about 5 or 6% of that, or call it, let's say $3,000. And that changes a little bit depending on volatility and stuff like that. But generally it's going to be in that 4 to 6% range.
- [11:50]
Ben Carlson
So Michael and I have had a number of people on the show talking about options and there's been stories talking about the explosion of options trading. So I think it would be helpful to kind of compare and contrast the difference between futures and options and maybe what options are better for in terms of looking for exposure versus what futures can give you in terms of exposure and kind of compare and contrast.
- [12:11]
Michael Batnik
Yeah. And to be clear, we have options on futures at CME as well. Right. So it's a derivative of a derivative. So I want to be clear about that too. And we've actually seen a significant increase in the number of retail traders trading the options that we list here as I think, as you allude the explosion of options generally among retail traders. So I think it's one of those rising tides. Right. As the retail trading population has become more aware and more interested in options, they've also discovered our options. But the difference is. I would compare it more. If you're trading options, it's. How would I say this? So an option has a strike price. They're both derivative. Let me actually back up. So a futures contract and an option are both derivative products. And I think, Ben, you were asking me more about options on stocks and the difference between those and futures. And I would say it's more like if you're trading, if you want straight long or short exposure to the S and P, the E mini or micro E mini, S and P future is going to be tantamount to that spider stock. Right. You're going to have what we call a delta of 1. So the price is going to go up or it's going to go down. With an option, it's.
- [13:42]
Craig Buick
How about this? There's no future contracts on individual stocks.
- [13:45]
Michael Batnik
There are not.
- [13:46]
Craig Buick
And also, as a shareholder, can I petition the board to change the ticker from CME to F U N?
- [13:54]
Michael Batnik
You can petition the board. I don't know how far you'll get with that.
- [13:58]
Craig Buick
Here's one of the keys.
- [13:59]
Ben Carlson
Michael's really talking his own book here, isn't he? Wow.
- [14:02]
Craig Buick
Here's one of the key differences between options and futures. The phrase out there is, I don't know if this is exactly true, but I'm sure it's directionally true. It's like 98% of options expire worth this. Something like that. Talk about how the futures contract differs in terms of settlement and all that. Like, are people actually delivering these contracts? Are they holding until Is expiry even the right term? Like, how does that work?
- [14:29]
Michael Batnik
Sure. And that's what gets a little bit confusing. And it's not the first time I've been stumped with that. So I should have had a better answer for you on the options versus futures, because they both have expirations. The difference is, and you're absolutely right, like an option, when you buy an option, whether it's on stock or a future, you're holding an asset that's going to expire. And if it expires in what we call out of the money, then it expires worthless. A future, on the other hand, if you hold it till expiration. And I should back up a second, because certain futures, like WTI Crude oil or gold actually will be physically delivered if you hold that contract until it expires. Now the reality is if you're an individual trader, your broker is not going to allow you to hold that future until it expires because neither you nor they want to deal with the delivery process. Right. I always get, I always get asked. Well, I, or basically I've heard a million times at industry events and things like that I don't want to trade futures because I don't want an oil tanker showing up in my front. Well, the reality is that the broker isn't going to let an individual trader who's not prepared to take delivery of 1,000 barrels of oil hold it until then. But if, if somebody were to hold one of those contracts until delivery, that's actually how it would settle. The person who was long would actually have to take delivery of that physical product and the person that would short was short would have to make delivery of it. Now in other products like the S and P or the NASDAQ and things like that, they're what we call cash settled. So if you hold a futures contract that's cash settled, like an equity index until it expires, we'll simply make one more what we call mark to market. So every day that you've held that futures contract, we've transferred money based on whether the position went for you or against you.
- [16:19]
Craig Buick
So every, that's a key component. Every single day you have to, you have to true up every single day.
- [16:25]
Michael Batnik
We do what's called a mark to market. So we're going to settle the price at a certain time every day depending on the product. And, and if you're long and it went up, we're going to transfer money to your account. If you're short and it went up, we're going to transfer money away from your account. Right.
- [16:40]
Ben Carlson
You're kind of netting it out essentially.
- [16:42]
Michael Batnik
Right, we're netting it out every day. It's like I said, it's called a mark to market. On the day that a cash settled futures expires, we make one more mark, we move the money and the position goes away. So if you were long and you held it till it expired, it would expire and you wouldn't have a position anymore.
- [16:59]
Craig Buick
You guys don't take IOUs, those are.
- [17:01]
Michael Batnik
As good as cash. We're looking into the iou, the digital iou, I think. No, but it really is that simple on a cash settled product. Now the difference between maybe not the difference, but with the futures products, if you were Long, let's say the NASDAQ 100 future. And you wanted to maintain that long exposure through the expiration. So, for example, the Nasdaq has four expirations, the quarterly expirations, March, June, September and December. So if you were long, let's say the September NASDAQ future, and you were coming up to the third Friday in September when it was going to expire, and you thought the NASDAQ was going to keep going up, or for whatever reason you wanted to maintain that exposure, you would simply do what we call a roll, which means that you would sell the September future and buy the December future. So that would essentially get you flat in the December or, I'm sorry, in the September future. And then you'd be long the December, maintaining that exposure to the NASDAQ 100. And that can be done in one transaction at CME.
- [18:09]
Craig Buick
How do you know if somebody is good for the money? So in other words, let's say somebody wants to buy a futures contract and it costs them $5,000, and then the position goes against them, but they don't have collateral in their account. Like, how does that work? How do you make sure that somebody doesn't get themselves into trouble?
- [18:25]
Michael Batnik
Right. So some of that. So every futures contract that's traded at CME clears through what we call the call an fcm, a futures Commission merchant. Those futures commission merchants basically guarantee the trades of their customers, which in this case, we're talking about the retail customer. So if I were to trade, and I'm not allowed to trade futures, given my employment here, but if I were allowed to, and if I were to trade a future, I'd have to find a broker who was either an FCM or had a relationship with an fcm. And that FCM is going to make sure that I have, you know, again, the performance bond that I talked about before is going to make sure that I had that money in my account before I was able to place a trade. Now, in the case of the, let's say the micro NASDAQ future, which I said is, you know, I'm not sure exactly what the margin is or the performance bond is at this time, but let's say it's around $4,000. I'd have to put up that for they would make sure that I had $4,000 in my account before I could initiate that position. And then if the mar. If the market went against me, I'd have to essentially maintain a certain amount. We call that maintenance margin. I'd have to put more money in my account in order to maintain that for the next day.
- [19:45]
Ben Carlson
So how about how do the costs work? Because I know there could be roll costs depending on the price of that new futures contract. So what is it? How much does that actually cost to trade these things?
- [19:55]
Michael Batnik
Yeah, so there would be commissions, essentially, is the answer to that. So CME has a fee that we're going to charge, and then whomever, whichever broker you might be going through is going to charge you a commission on that. And that varies from broker to broker. And I think a lot of times it varies depending on how many futures contracts you're trading. Sometimes brokers will tier their costs if you're trading, you know, a lot of futures, but essentially that's it. So if you look at a lot of the retail broker websites, it will give you the commission for each contract and then there'll usually be a footnote that will say, plus exchange fees, and that's the CME fee.
- [20:35]
Craig Buick
Here's one of the differences between trading futures, or correct me if I'm wrong, trading futures versus just trading spy or something else. When you transact in the cash market, you're buying shares from somebody or basket of stock from somebody. Right. Somebody selling. You're buying in the futures market. It doesn't really work that way. Right. Like, isn't there somebody who's selling you the contract versus somebody who's buying the contract?
- [20:58]
Michael Batnik
Yeah, that's exactly right. So. So if you go back to that very basic definition of what's a future? It's simply a contract to buy or sell something at some point in the future. So it's not this concept of there's a finite number of. Of shares, for example, of the S and P future. If you and I were to make a trade right now, we would essentially create what we call one contract of open interest. So if I were to buy it and you were to sell it to me, we've created what we call open interest in that particular contract. So it's not this idea of you have a share and I'm buying it from you. Which is also why if I wanted to short a futures contract, it's a lot simpler than if I wanted to short a securities contract where I'd have to borrow, essentially borrow that in order to then short sell it. With futures, because it is a contract, I simply sell it and you buy it.
- [21:50]
Ben Carlson
So what are the reasons people are using futures? Obviously, hedging seems like to make sense. Maybe you think the market's going up in a short period of time. Like what else Am I missing what are people using these for?
- [21:59]
Michael Batnik
Yeah. And if you go all the way back to the beginnings of the exchange, you know this, and, and if you all. And if you listen to that earnings call that you alluded to at the onset, a lot of times you'll hear our chairman and CEO Terry Duffy say CME is the, is the place that the world comes to manage risk. So at its most fundamental level. You're absolutely right, Ben. Futures are designed and were created 200 years ago as a hedging vehicle. Right at that time, it was farmers that were hedging their crop. When you look at like the individual or the retail trader, a lot of what they're using futures for is basically a product in their active trading portfolio. So they may be intraday scalping futures, they may be swing trading futures with a one to three day time horizon. Maybe they're swing trip momentum trading with a little bit longer time horizon. And then there are of course individuals that are using futures to hedge, maybe like a long stock portfolio if we're coming into like an earnings season, for example, or a big employment or inflation number. You also have individuals that again are using futures to hedge that long stock portfolio that they may have. So it kind of runs the gamut, but I would say mostly they're using it as an active trading vehicle.
- [23:19]
Craig Buick
So one of the greatest commercials in the history of Wall street is this. A man and a woman sit down at the table. You know what I'm talking about, Craig?
- [23:30]
Michael Batnik
I'm not sure. Okay.
- [23:33]
Craig Buick
And she says to him as she sits down, did you hear about the NATO plane downed by Russia? Markets are a mess. Everybody's selling, or at least trying to, if their brokers are up and running. And he says, but it's almost 8 o', clock, everything is closed. And he looks at his watch and she says, that depends on who your broker is. I could trade in Chicago, London, Hong Kong right now. Wow. The market's already down 2%. I'm sorry, I need to do some hedging trades. You remember this one?
- [23:59]
Michael Batnik
I don't, no. I haven't seen this one. Who?
- [24:01]
Craig Buick
You remember this one?
- [24:02]
Ben Carlson
It was on CNBC for a while. It was a classic.
- [24:05]
Craig Buick
It is a classic. So it's interactive brokers. Credit to them.
- [24:08]
Michael Batnik
Okay.
- [24:09]
Craig Buick
But the reason why I bring that up is because, first of all, it's just an all time classic. What a banger. But also to Ben's point, there are people who are very comfortable holding whatever positions they are for the long term. But they might be bearish in the short term and whatever, want to do some hedging trades just like she did and she's willing to spend a couple of bucks, whatever. You know your risk tolerances to protect your portfolio and you get some leverage. And I'm sure that is a critical use case.
- [24:39]
Michael Batnik
Absolutely. There's no question about it. And that's more of the use case that I was alluding to. Kind of the second half of my answer was certainly there's a lot of individual traders who are long, maybe a basket of technology stocks and they can use the micro or the E mini NASDAQ 100 to hedge that in the short term. Right. Or maybe they call it trading around a position they're long, a basket of, of, of equities, you know, whether it's technology or otherwise. And they, they, they sort of trade around that position. That's kind of their long term, but like kind of exactly what you just mentioned. They think in the short term we're going to come into some volatility. So they use futures to quote, trade around that core position. And that's certainly a use case that we see.
- [25:23]
Craig Buick
All right, here's another one from the earnings report. I believe this is from. Yeah, it is. Okay. Record cryptocurrency average daily volume of three contracts. That's $13.6 billion notional. Wow. I'd like to see the people that are doing this, although I'm sure it's a lot of, a lot of computers, a lot of maniacs. Respectfully. Actually, we just hit on a thing that I want to mention. What, when, when you see notional, what does that term mean?
- [25:50]
Michael Batnik
It's a great question and sometimes we gloss over it. So I'm going to go back to the, the micro E Mini NASDAQ example for a second. So right now the NASDAQ I think is trading around 24,000 or something like that. Futures have what we call a multiplier. So Instead of like 100, people are used to trading 100 shares of stock. To contrast that with futures, it's a multiplier. So in the case of the micro imminent NASDAQ, the multiplier is 2. So what you would do is take the current value of the index or the current futures price, let's call it 24,000, multiply it by two to come up with 48,000. Well, that's the amount of exposure that you have to the NASDAQ 100. It's what we call notional. So we use the word notional exposure, but essentially just means that you are, you have $48,000 worth of exposure to the Nasdaq, such that if the NASDAQ went up by 10%, you would expect to make about $4,800 on that. Make or lose, I should say, on that, on that trade.
- [26:56]
Craig Buick
All right, so getting back to the crypto stuff, what does that look like? Where can people, God, I'm afraid to even ask this question. How do people trade futures on crypto using the exchange?
- [27:07]
Michael Batnik
Great question. And it's obviously a newer asset class that we have. And generally what we see is the micros in the crypto are particularly interesting, or I should say the retail trading crowd is particularly interested in the micro cryptos because the bigger cryptos are a really big contract. The first futures contract that we launched on cryptos was what we would call the standard size bitcoin, which is a contract worth five bitcoins. So what is it? Bitcoin 100, let's call it $120,000. That's 6, $600,000 worth of bitcoin with one futures contract. So if you were trading this, the standard bitcoin, again, we'll go back to notional exposure. You'd have $600,000 worth of Bitcoin exposure with one futures. And when you think about how volatile bitcoin can be, that's an extremely large futures contract for a lot of individual traders. So what we've seen is a migration of the retail traders to what we call the micro size contracts. Again and just to contrast it with the standard, the micro Bitcoin is 1/10 of 1 bitcoin. So still a relatively large product at over 10,000, but much, much more manageable for the retail trader or investor than that standard size bitcoin at 5 bitcoin per contract.
- [28:30]
Ben Carlson
So what's the breakdown in terms of how much has crypto gained market share for you guys in terms of trading volume or however you want to notional value or whatever is easiest to benchmark it.
- [28:39]
Michael Batnik
Yeah, I don't have the specific numbers for you at my fingertips, but certainly since really since the last election and we kind of saw cryptocurrencies in general catch a bit, if you will. You know, we saw, we saw an increase in prices really across all cryptocurrencies. We certainly saw a huge increase in our trading since then and it continues today. So it's really, you know, certainly from a retail perspective, it's one of our faster growing products. I don't have the specific percent increases in front of me though.
- [29:15]
Ben Carlson
So your title is head of retail education. What does that mean? What are you doing to help people?
- [29:20]
Michael Batnik
Yeah, I think, you know, as, as we, we've seen this increase in retail trading and futures that, that you guys have talked about throughout. We have a responsibility to make sure that traders or potential traders of futures understand the products that they're trading. Right. Because there are these nuances that we've talked about throughout this conversation like the leverage, like margins, like the expirations, everything like that. So as we've seen this increase, I think it's become more and more important and there's a bit of a, you know, sort of chicken and egg. I think, you know, one of the reasons that we've seen this increase in retail trading in futures is because there is so much education available to retail traders that, you know, wasn't there 10 or 20 years ago. So our job is to make sure that traders understand how the products work, the risks involved, obviously. Right. We've talked about this idea that you only have to put up a small amount of the notional exposure you're getting. So people have to understand that with. That is a double edged sword. It's, it's a leveraged product which can accelerate gains and losses. So all of this stuff. And then you know, obviously we want to educate people on the different markets that we have futures on which we have futures as well.
- [30:38]
Craig Buick
I feel like people that want to get leverage, like let's just say if they're in the double X or the levered ETF for example, there are some people who don't know how that works. There are some people who think that if they buy and they hold that they're getting 2x the exposure, every single, like it just compounds. They're just actually getting it. Whether they hold it for a week or a month or a year, they think they're getting 2x over every period of time, which is obviously not true. I kind of feel like, and I'm making this up and maybe I'm just hoping that if you are trading a futures contract, you kind of know what's up, you know what I mean? I feel like you have to have, there has to be like a step that you take to be a futures trader, even if it's your first time. These are people who sort of kind of know what they're doing.
- [31:21]
Ben Carlson
You want a driver's license for futures traders?
- [31:23]
Craig Buick
Yeah, yeah, pretty much. I'm saying they've got their driver's license.
- [31:27]
Michael Batnik
We don't want to go so far as to, to require driver's license, but you're absolutely right. And the, the population that we sort of target is certainly the more sophisticated retail trader. There's no question about that. And to go back to your first comment, I'm not sure I understand how the 2 times and 3 times short and long lever ETFs work, but I understand how futures work. And you know, one of the things that I think you know is, is, is nice about futures is let's, let's just take WTI crude oil. You're literally trading WTI crude oil so you don't have to worry about is it correlated with this or that or is there a decay in the, the, like some of the leveraged ETFs that you're talking about. You're trading the pure commodity. And you know, one of the things we say is what's more correlated to crude than crude. So when you're trading futures, you are literally trading that particular asset. And then, but, and then, then the follow on to that is, is you're absolutely right. People that are trading futures tend to learn how they work, tend to be experienced traders and kind of like you said, know what they're doing.
- [32:35]
Craig Buick
I mean the cash settlement at the end of the day makes it very, you're going to learn fast.
- [32:38]
Michael Batnik
You're going to absolutely, you know, you're going to get marked every day. You're going to get a debit or a credit and you're levered on that as we've talked about.
- [32:48]
Craig Buick
All right, Craig, was there anything that you think is important for people that are listening for the first time or even if they're experienced, any, any big topics that we might have missed?
- [32:58]
Michael Batnik
You know, I think we touched on, on most of them. Nailed it, nailed it. You know, the whole idea. And you guys have asked me, why are people trading futures? And you know, and quite simply, people are trading futures because of that capital efficient nature, because they're open around the clock. Because if, if you've got less than $25,000 in your account, things like pattern day trading rules don't apply, the ease with which you can get long or short. So you know, I think we covered a lot of the basic reasons that we're seeing an increase in futures trading.
- [33:34]
Ben Carlson
Perfect. Where do we send people to learn more about the CME Group?
- [33:37]
Michael Batnik
We have a, what I think is a world class educational portal called CME Group Institute. And if you go to cmegroup.com education it'll take you right there. It's our educational portal that I has what I would consider 101 level classes all the way up to maybe what I would consider graduate level classes in futures. So I think it's a great place, whether you're just starting in futures or you've been training them for a long time to understand the product and what's offered. And you know, I don't think there's anything any such thing as knowing too much. So I think it's a great place, a great resource for people to go to.
- [34:13]
Ben Carlson
Perfect. Thanks, Craig. Okay, thanks to Craig. Remember, check out cmegroup.com to learn more. Email us animalspiritscompoundnews.com.