Small Exchange to launch first US cannabis future

Small Exchange, the growing Chicago-based market, has announced plans to launch the first US cannabis futures contract.

The exchange, which launched in June last year and offers a range of small futures contracts on equity indices, foreign exchange, US treasuries, metals and crude oil, said it will launch the Small Cannabis contract on June 21.

The new contact will offer access to 21 listed producers and distributors of medical and recreational cannabis rather than the underlying commodity itself.

The exchange said: “Starting Monday, June 21st, you can trade producers and distributors of medical and recreational cannabis products using the newest addition to the Small Exchange suite of products: Small Cannabis S420.”

Small Exchange said the cannabis futures contract will be cheaper than exchange-traded fund (ETF) alternatives and designed for retail traders and investors with a contract size of $1,200.

The exchange also offers margining that it claims requires up to 50 times less capital than the equivalent stocks or ETFs. Small Exchange said all of its products have a standardised structure so they are easier to trade than futures traded on the mainstream markets.

The Small Exchange cannabis future will be the first of its kind in the US and follows Montreal Exchange’s S&P/ MX International Cannabis Index future which launched early last year.

The Canadian exchange started offering options on individual cannabis firms in 2017 and these traded 3.4 million lots in 2019, over three quarters of which were traded by retail clients, according to TMX Group, which owns the Montreal Exchange.

The Small Exchange launched on June 1 last year backed by Interactive Brokers and Phillip Capital, both of which invested $2 million in the firm.

Small Exchange chief Don Roberts said when the market launched: “We felt that the existing futures products were very difficult for the individual public customer to consume because of the different tick sizes and the expiration cycles that were all over the map.”