CME Group operates the largest regulated marketplace for foreign exchange globally and is a leading primary venue for price discovery. The scale of the global offering, deep liquidity, transparency and choice of execution provides clients across geographies with efficient access to global markets.
There are two main ways to trade: the Globex matching engine – an all-to-all, credit agnostic central limit order book with firm liquidity and transparent pricing available to trade 23 hours a day; and via blocks and exchange for related positions (EFRP) – disclosed, relationship-based trading using over-the-counter liquidity with over 20 chosen counterparts.
“We also offer FX Link, the only cleared, capital efficient central limit order book for FX swaps, which is the tradeable spread between OTC FX spot and CME Group FX futures,” says Paul Houston, global head of FX products at CME Group.
Last year saw a step change in participation in CME Group FX futures and options, with 24% growth in traded volumes and over 300 entities starting to trade for the first time or expanding their usage. CME has grown its market to include over 90,000 different active traders and has invested in offering more flexibility for clients to access cleared products, covering FX forwards, NDFs, swaps, and options.
The panel of liquidity providers for disclosed, OTC-style trading via blocks/EFRP has expanded to include over 20 names – covering most of the big banks as well as a variety of non-bank liquidity providers and regional banks.
FX Link, meanwhile, is now available in nine currency pairs, CME is exploring further additions to this platform, given the demand from customers to have a tradable and observable basis between the OTC market and futures liquidity.
“Over the last five years, we have reduced minimum price increments on currency futures eight times, reducing the cost to trade by up to 60% for end users,” says Houston. “We have extended reporting times of our FX block trades to 15 minutes, reduced the minimum price increment on blocks of G10 currency pairs to 0.1 pip, and partnered with firms to automate where possible, making it 100% electronic for systematic trading customers.”
Costs resulting from the uncleared margin rules combined with the desire from certain traders to electronify and automate their FX options trading have also created further focus on the cleared CME FX options offering.
As a consequence, the FX proposition has been enhanced by providing expiries on every day of the week out to two weeks, more strike granularity, the addition of CNH FX options, and new functionality such as straddle runs within the CME proprietary front-end trading platform.