Is It Time to Split the S&P 500 Futures Contract?

By October 1996, the value of the S&P 500 Index futures contract had grown to five times its value at its inception in April 1982. One way to make the contract more accessible to small investors and to smooth out trading is to split the contract. Splitting the contract could increase transaction costs, although competition would probably limit the amount of the increase. Less clear is the need for increasing the minimum percentage tick size. The current minimum tick size is small for S&P 500 futures compared with that of other futures and also common stocks. The larger tick size could affect volume, however, by increasing trading costs and reducing the willingness to trade.