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Foreign Exchange

GFX: Enhancing exchanges

Liquidity: what goes around comes around.

Repackaging liquidity

Talking of liquidity: what goes around comes around. Consider a company called GFX Corporation. According to a Futures Industry Magazine from 10 years ago, “futures exchanges are continually searching for ways to enhance the liquidity of their markets, especially when launching new products”.

And, a decade ago, it seemed like my friends in Chicago had found the answer. “Paid and unpaid market makers, rebates for trades, privileges to trade in other markets if a certain number of trades are made in a target market – all these have been tried. New ground was broken on January 23 [1997] of this year, when the CME launched the first exchange subsidiary whose purpose is to enhance the liquidity of its products,” the old article continued.

“Actual transactions are offset in the interbank market and trades are cleared through a CME member firm. The objective is to create liquidity not to make a profit, so the exchange expects to foot the bill for overhead,” the magazine added.

Now this report covers events that are almost a decade old. Back then, the CME hadn’t even demutualized. What puzzles me is that GFX is still active.

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