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Futures more cost effective than ETFs, finds CME Group study


A new report from the CME Group compares the all-in cost of replicating the S&P 500 total return via equity index futures and via ETFs and concludes that in all but one case, futures are the more cost effective vehicle.

The study captures transaction costs, market impact and holding costs for a mid-sized institutional investor, analysing the CME E-mini future versus three leading US-listed ETFs. It looks at four scenarios on both a short (less than three months) and long (more than three months basis). The scenarios are the fully funded investor;  the leveraged long position; the short position and the non-US investor.

The findings found that for a fully-funded investor over the longer term only ETFs provided a more cost effective return. The report says: “For fully-funded investors, the cumulative effects of higher implied financing currently make the ETF a more efficient alternative longer-term, but for periods under around 100 days (depending on the ETF) the higher transaction costs of ETFs make futures more attractive.”

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