Five Things To Know About CME Foreign Exchange

5 Things CME FX

 

A number of factors have united in the last 40 years to promote free trade across geographic and political boundaries. Political advances promoting free trade include reduction or elimination of restrictive tariffs, capital controls and subsidization of local businesses, while  technological advances have included reduced transportation costs promoted by containerization of products for ocean shipping and advanced telecommunication systems lead by the emergence of the internet.

Today, companies frequently conduct business outside of their own country and, in the process, earn revenues or incur liabilities denominated in currencies apart from their native currency. In the process, companies are becoming more exposed to the risk that foreign exchange rates are unpredictable and can fluctuate in adverse directions. These uncertainties may make it difficult to manage current cash flows, plan future business expansion or to succeed in a competitive market environment. As businesses become more exposed to changing currency rates the use of a central marketplace, like CME Group, can be more helpful to managing risk. Here are five things we think you need to know about CME’s expanding FX business.

1. We’re the world’s largest regulated marketplace for FX

With over $127 billion in daily liquidity, CME Group is the world’s largest regulated FX marketplace. CME has a global product suite of 60 futures and 31 options contracts, and provides clearing for several over-the-counter derivatives, including non-deliverable forwards (NDFs) and 26 cash-settled forwards. And this year we set 26 new volume or open interest records in Q2 2013 and 15 in the month of June alone with average daily volume in Q2 2013 of 1,042,084 contracts per day.

2. Our options volume is now nearly all electronic

Options on futures continue to show electronic growth and strong performance. The extensive suite of options on futures available at CME Group exchanges offers the liquidity, flexibility and market depth you need to achieve your trading objectives, from simple to sophisticated. Options on FX futures at CME continue to grow, with 86 percent of all options trading electronically in June.

3. We are expanding with new FX Futures on our soon-to-launch European Exchange

Product innovation, liquidity and financial surety are the three pillars upon which CME Group has built its world class derivatives market. Because London remains the primary financial center for FX trading, CME Group plans to start later this year launching a suite of global FX products (some 30 per cent of total FX volume already emanates from Europe and Asia) on our new exchange — CME Europe, pending regulatory approval.

Read More: Why London? Our Choice Was Clear

4. We’re one of the longest running FX marketplaces

CME has offered FX futures and options dating back to the breakdown of the post WWII Bretton Woods agreement in 1972 that imposed fixed exchange rates between the world’s currencies. Last year we celebrated 40 years of offering FX futures and the need to use currency futures as a hedge vehicle is as critical as ever today.

Read More: Nearing Middle Age, FX Futures Show No Sign of Slowing Down

5. We’re a fully transparent and anonymous marketplace

CME Group’s open, fair and anonymous trading environment delivers equal access to markets and pricing information whether you are a AAA bank, corporation or an active individual trader. The complete book of prices is visible to every customer, and transaction costs and fees for all parties are fully disclosed.

About the Author

Derek Sammann is Senior Managing Director and Global Head of Commodities & Options Products at CME Group.

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  1. By Five Things to Know About CME Foreign Exchange on Aug 25, 2013 at 10:03 am

    [...] to grow, here are five things we think you need to know about CME’s expanding FX business: http://openmarkets.cmegroup.com/6428/five-things-to-know-about-cme-foreign-exchange. CME FX products are listed by and subject to the rules of [...]