• SHIFT TO 10am NEW YORK EXPIRATION TIME: Across all FX Options. Last 2pm Chicago expiration is the June Quarterly on 7June, the first 10am is the Wednesday Week2 on 12June – to bring our markets in line with OTC convention
• STRIKE LISTING CHANGE: New quarterly strikes are now available in CAD/USD, AUD/USD, EUR/USD and JPY/USD – to provide traders with more choice and more ability to optimize strategies
• TWO NEW PAIRS ON FX LINK: NZD/USD and USD/CHF launched on February 19, 2019 – to create more opportunities to trade the OTC FX & FX Futures spread in these currencies

Minimum Price Increment (MPI): The MPI is changing from 1 to .5 for non-consecutive month intra-currency calendar spreads.

Announced: March 21 2019
New Release: March 25 2019
Live: April 29 2019
 

Currency market volatility was exceptionally low in Q1 as previously divergent central bank policies converged again, resulting in reduced trading volumes across the FX market and in CME Group’s FX Futures and Options. During 2017 and 2018, the US Federal Reserve as an outlier and alone among the world’s major central banks, tightened policy aggressively, raising rates a further seven times and reducing the size of its balance sheet. The sharp Q4 equity selloff convinced the Fed to join its peers (the ECB, the BoE, the BoJ, the RBA etc.) on the side-lines as it put its tightening policy on hold. This left FX investors without interest rate- trend information with which to differentiate among the currencies.

Moreover, with the Fed moving to the side-lines and China actively easing monetary policy, equity prices rebounded, which, in turn, led to a sharp decline in implied volatility on options across many asset classes, including currencies. The only exception was the British pound where investors spent much of Q1 considering the implications of Brexit on March 29. Yet, when March 29 finally rolled around, Brexit was postponed, leaving the pound still hanging in the balance until the next potential cliff edge on October 31, 2019. Furthermore, the recent extension provided by the EU triggered a sharp and significant drop in GBP implied volatility, bringing it more in line with other majors.

The JPY/USD Vol cone showed the Implied Vol curve near the bottom 5th percentile along the whole curve.

In EUR/USD, taking a 12-year lookback of 30-day EUR/USD volatility, shows Implieds (blue) breaking below Historical (orange) and through the 5% longer term support level.

The only electronic spread connecting the OTC FX Market & FX Futures, linking liquidity and creating access to the capital efficiencies of CME FX Futures.

In response to the ECB announcement on March 11, more participants utilized FX Link than ever before – as a source of liquidity and a means to manage market risk in a capital efficient way. Volume reached a record 26,039 contracts traded with a notional of +$2.86B.

March volume averaged 14,000 contracts from a diverse user base including banks, prop trading firms and buy side firms. All pairs are trading, including NZD & CHF which launched in February, and increasingly strong activity in Mexican Peso.

Liquidity is building with top-of-book regularly 0.1-0.2 ticks wide and $50-$100M deep to better enable multiple FX execution methods.

Source: CME. All data as of March 2019.

Visit cmegroup.com/fxlink to see how market participants are using FX Link to manage swap, forward, basis, options and commodity risk.

In March 2019, more European participants turned to CME FX markets to manage their risk, as GBP/USD traded towards the highest volume since the June 2016 Brexit Referendum, in response to uncertainty surrounding the UK’s departure from the EU.
 

Record Open Interest was achieved on March 15 of 326,243 across futures and options with the whole complex up 30% YTD – with increased activity on FX Link.
 

This contract became cash-settled in June 2018, and is increasingly becoming a useful hedging tool, in part because of the margin offsets uniquely available at CME with copper and gold, and in part because of increased accessibility and activity in the renminbi.

CME is increasingly being utilized as a venue to access Russian assets and commodity markets, with the benefit of facing a regulated, central counterparty with reduced credit risk – volume up 19% YTD.

Quarterlies, monthlies and FX Link create a comprehensive, efficient, central liquidity source for managing various FX forward & swap exposures.

We have been changing our expiration to 10 a.m. New York to bring our FX options in line with the primary OTC market convention. The last 2 p.m. Chicago expiration is the June Quarterly on June 7, the first 10 a.m. is the Wednesday Week 2 on June 12.

All market participants need to be aware and can visit cmegroup.com/10am for more details, along with The Fix, codes, full listing schedule, impacted products and a two minute video on how this change will come into effect.

FX options liquidity is holding strong in the majors, although GBP has been clearly stressed lately given the continued uncertainty regarding Brexit.

Note: Data represents the time-weighted average spread and size over 5 trading days, during 7am-4pm CT shift.

New quarter strikes are available in CAD/USD, AUD/USD, EUR/USD and JPY/USD, providing traders with more choice and more opportunity to optimize execution. Since launch in early March, these strikes already comprise ~22% of total volume, with activity in all currencies, across all segments.

Of note: The more recent numbers are temporarily distorted due to the expiration of the April monthly contract as activity was more focused on the previously accumulated open interest in the standard strikes.

To access the tool, visit cmegroup.com/options-calendar

Continue learning about the futures and options markets with a variety of courses designed to help you at each stage of your trading journey. Our courses are designed to help you deepen your knowledge and improve your understanding of our markets.

To access the CME Institute, visit cmegroup.com/fx-quote-conventions

To access the full suite, visit cmegroup.com/fxtools