SpaceX gives CME’s single-stock futures a much-needed boost

New contracts could take off as IPO bolt-on to S&P 500 contracts

Key points Summary Q&A

• CME will list single-stock futures on 55 large US companies from July 27.
• The contracts can offer up to six times leverage and let investors add, hedge or short single-stock exposure without stock-borrow costs.
• Single-stock futures could be used to bet on SpaceX, which went public at a $1.77 trillion valuation after selling 4% of shares and is excluded from the S&P 500 for now.
• Strong retail flows, equity financing stress and upcoming mega IPOs such as Anthropic and OpenAI could help US single-stock futures catch on, after heavy trading in Europe (over 750,000 contracts daily at Eurex).

These summaries are generated by an LLM, but edited by humans.

US investors may finally have a reason to trade single-stock futures.

CME will list futures contracts on 55 of the largest US companies on July 27.

The instruments are already popular in Europe, with over 750,000 contracts traded daily at Eurex. While two previous efforts to bring them to the US fell flat, this time could be different.

When they first arrived in the US in the early 2000s, single-stock futures were touted as an efficient way to finance equity positions or make short bets without incurring stock-borrow costs. They can also be used to surgically add to or neutralise single-stock exposures within a wider portfolio. That could make them appealing to fund managers looking to ride the wave of mega IPOs, such as SpaceX, or bet against them.

Elon Musk’s space exploration business became the sixth largest company in the world by market cap when it went public in June, with a valuation of $1.77 trillion. But only a select few can hold the stock. SpaceX sold just 4% of its outstanding shares in the IPO, raising $85.7 billion.

Retail investors have already ploughed more than $500 million into leveraged and inverse exchange-traded funds referencing SpaceX

That is one of the reasons why SpaceX is currently excluded from the S&P 500. While Nasdaq waived long-standing trading and liquidity thresholds to allow SpaceX near-immediate entry into the Nasdaq 100, S&P Dow Jones Indices held firm on its own criteria, which includes 12 months of public trading, four consecutive quarters of profitability and a minimum free float of 10%. Investors will have to wait until at least mid-2027 before they see SpaceX in the world’s most tracked equity benchmark.

Those that want exposure sooner can simply bolt a SpaceX single-stock future onto CME’s S&P 500 e-mini contracts to get their fix. The instruments could be an efficient alternative to buying shares and come with up to six times leverage to boot.

SpaceX is also one of the most shorted stocks in the market, with nearly half the free float out on loan in mid-July. As of July 22, the stock was down nearly 30% from its IPO price and over 40% from its peak. CME’s single-stock futures could appeal to short sellers that want to add to their bets even as the supply of stock available to borrow runs dry.

There are other reasons to think single-stock futures might actually catch on this time.

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Retail flows have swelled since the 2020 Covid-19 pandemic, most notably in targeted leveraged bets such as zero-day options. And despite a choppy start to trading, retail investors have already ploughed more than $500 million into leveraged and inverse exchange-traded funds referencing SpaceX. Equity financing stress has become more evident – most notably in late 2024 and in June this year, when hedge funds piled into leveraged bets on big tech.

CME says both retail and institutional investors have already expressed strong interest in its new single-stock futures, including contracts on SpaceX.

The launch coinciding with the SpaceX hype was more luck than judgement. Risk.net first reported on CME’s plans to introduce single-stock futures on ‘Magnificent Seven’ tech names in late 2024 – long before the first indications of a SpaceX IPO.

The exchange group’s plans have since been expanded. The launch will comprise 55 names – mostly large tech firms – and include both institutional and retail-friendly contract sizes. The contracts are set to begin trading on July 27, subject to final approvals.

If the IPO pipeline is anything to go by, CME’s single-stock futures could address a growing market need to gain targeted and leveraged exposure to mega-companies that go public and remain outside benchmark indexes. Artificial intelligence giants Anthropic and OpenAI have both filed listing documents with the Securities and Exchange Commission and could go public before year-end, in deals that could value each firm at around $1 trillion.

That could provide the necessary fuel for US single-stock futures to finally get off the ground and into orbit.

Editing by Kris Devasabai