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Foreign Exchange

FX futures: Competition comes to exchange-traded FX

The relaunch of FX futures by Ice finally provides the CME with some proper competition.

Although the vast bulk of activity in foreign exchange takes place in the over-the-counter market, significant volumes are also transacted on the CME. The exchange’s FX product suite is now so successful that is possibly the second-largest trading venue, other than on the banks’ own proprietary systems, after EBS. The CME’s revival has been staggering. In April 2001, its average daily turnover amounted to just $6 billion a day. This August, that figure had grown to $90 billion and September’s volumes, albeit distorted by the calendar roll, are set to be even higher.

The CME has clearly tapped into demand for a viable exchange-traded FX product and it has also capitalized on the fact that it provides a multi-asset trading venue. "We’ve seen traders moving across into FX from equities and, in some cases, these clients are starting to look at commodities. Around 35% of our clients have traded something else before moving to FX," says Derek Samman, managing director and global head of FX products at the CME. "We provide a level playing field to all our participants – they all get equal access to each and every price in our futures market. Additionally, there are other benefits to trading on exchange from a regulatory perspective, such that all of our market participants benefit from operating in a regulated market with segregated funds, which virtually eliminates the counterparty risk.

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