While such trades occur along the curve, the real growth has been in contracts in emerging market currencies (particularly the Russian rouble and Brazilian real) with a maturity longer than one year.
Patrick told theweeklyFiX: “Block trades in FX futures are agreed bilaterally off-exchange between dealers before being given up to our CCP clearing house. What we have seen since the second half of last year is a spike in these kinds of trades being submitted; they have occurred as far as five years in our Russian rouble contract. These volumes are significant and mostly in illiquid tenors and show a trend we cannot ignore. More recently we listed additional Brazilian real contracts going out five years to gauge the market’s appetite and have already seen a healthy growth in open interest and early signs of a similar pattern.”
There has been some concern over the implications of the authorities forcing FX swaps or forwards into clearing or a central counterparty model. But here is an instance of the market enthusiastically embracing such a scenario to its benefit, effectively trading forward FX cleared through a CCP to the benefit of counterparty credit exposure.