With year-to-date trading activity in blocks and EFRPs across CME listed FX products up more than 180% versus 2021, this paper looks at what’s driving increased interest, why now, and who is benefiting.

Foreign Exchange (FX) products remain outside of any direct mandate or regulatory requirement to be centrally cleared, but a growing number of end-user customers are embracing or considering clearing as a mechanism to achieve potential efficiencies – be that liquidity, operational, or margin efficiencies.

Regulatory drivers, such as the uncleared margin rules (UMR) and the introduction of the standardized approach to counterparty credit risk (SA-CCR) as the new calculation mechanism for bank capital, are both providing further catalysts for change within the world’s largest financial asset class.

“With changes in UMRs, we have seen a growing appetite to trade listed FX futures, especially via block markets, which offer additional liquidity to the centralized order books that is more synonymous with existing spot and forward markets.”

— Lee Spicer, BNP Paribas, Global Head F&O High Touch Execution

Benefits to end-users: cleared FX

Listed FX products provide a complementary pool of liquidity and the ability to access clearing via a very well-established and operationally efficient marketplace. Over the last two years, buy-side accounts have continued to embrace CME listed FX products, helping to achieve all-time records in open interest, client positioning, and trading volumes for both major (G7) and EM currency pairs during 2021. The drivers for the growing adoption and usage of cleared, listed FX covers a number of angles from best-execution drivers on the ‘front end’, through to margin and operational efficiencies on the ‘back-end’; including the ability to trade without an ISDA and the removal of counterparty credit risk against the liquidity provider firms.

Figure 1: Number of large open positions held by customers in CME FX futures as of March 15, 2022.

Number of large open positions held by customers in CME FX futures as of March 15, 2022.

Familiarity driving adoption: OTC conventions and OTC liquidity

Buy-side and sell-side adoption driving change: Blocks and EFRPs as a mechanism to access clearing for FX forwards, NDFs, and options

Figure 2: Year-to-date 2022* change in average daily volumes for blocks and EFRPs of CME Group listed FX products versus 2021

Benefits to liquidity providers: Blocks and EFRPs as a means to manage UMR and SA-CCR while still maintaining client relationships


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