Non-Farm Payrolls Futures Coming from CME

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Rhody Trader

Well-known member
Dec 11, 2004
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Massachusetts
www.TheEssentialsOfTrading.com
#1
Here's the core of a press release a colleague forwarded to me today:

CME Group, the world's largest and most diverse derivatives exchange, announced today that futures and options on futures on the U.S. Bureau of Labor Statistics' (BLS) Nonfarm Payroll data are scheduled to launch Sunday, April 27, 2008, in anticipation of the Friday, May 2, release of the April economic data.

The contracts, based on the monthly BLS Establishment Survey of 375,000 businesses that is usually released on the first Friday of each month, will allow customers to directly manage their exposure to the government labor number or to offset positions in financial markets. The Nonfarm Payroll report is typically the first major economic release of each month and speaks to the condition of employment from the prior month. It is closely followed as a way to gauge how the Federal Open Markets Committee perceives economic growth.

"There is a strong correlation between the Nonfarm Payroll report and CME Group financial futures contracts as well as other financial instruments," said Rick Redding, CME Group Managing Director of Products and Services. "Listed futures and options on futures on the Nonfarm Payroll are a transparent, straightforward and accessible way for our customers to offset unexpected financial market moves that often occur when this number comes out."

The Nonfarm Payroll contracts will be listed exclusively on the CME Globex(R) electronic trading platform, Sunday through Thursday from 5:00 p.m. to 4:00 p.m. Chicago time. One contract will be listed at a time and each contract will be listed on the Monday after the previous month's release. Trading in the expiring contract concludes at 7:25 a.m. on the day that the BLS releases its Nonfarm Payroll report. Each contract is valued at $25 times the change in the Nonfarm Payroll number from the previous month. For more information, please go to www.cmegroup.com/NFP.​

This seems like it could be a very interesting development. A futures broker contact of mine thinks it will reduce volatility around the monthly NFP release, and I think he's probably right - if the volume reaches a high enough level. Imagine being able to hedge your exposure to that report in a direct fashion and folks being able to make their speculative bets right in something directly tied to the NFP. The could take quite a bit of the punch out of the post-release reaction to the figures, which I know is a favorite play of many news traders.
 
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