JULY 2023

The FX Report

FX Futures | FX Options | FX Link
 

In this edition: Keep up with our latest product developments and learn about the forces driving them. Stay connected to the changes in our market and the wider FX marketplace.

  • 27 Jul 2023
  • By CME Group

Reuters Analysis: Regulatory factors and the growing interest in cleared derivatives

CME FX open interest continues to increase with growing buy-side adoption of cleared FX products. The CME FX futures and options market now trades an average notional daily volume of $81.8 billion versus $76 billion in 2021, indicating more investors are using exchange-traded derivatives as an alternative to OTC products to optimize funding and the capital impacts of SA-CCR and UMR.

Source: CME Group data as of June 2023

Read the Reuters analysis discussing a trend of foreign-exchange investors moving OTC trades to lookalike products on exchanges to avoid higher regulatory costs.

Read the full analysis

CME Group named Best Exchange for FX

CME Group was awarded the best exchange for FX at the FX Markets 2023 e-FX Awards for the second year in a row. Our focus on delivering execution choice drew many new firms to our marketplace in the last 12 months, leading to record trading volumes, as we helped clients efficiently manage risk during a highly volatile year.

Read more

Electric Dreams: Automating OTC-style trading of cleared FX forwards, NDFs, and options

Access to the unique liquidity and clear benefits of CME FX products is now more flexible than ever. In this article, we discuss how liquidity providers and trading platforms are evolving and automating the OTC-style trading of CME cleared FX products, providing more flexibility, strong liquidity, and ultimately, trading efficiencies.

Read the article

You Can Quote Us on That: Using RFQs to access FX option liquidity

Did you know: In 2022, over 70% of all options at CME Group were traded as spreads or strategies? In our latest article, we discuss why options strategies – including delta-hedged options – are so popular with FX traders. We explore how RFQs (Requests for Quotes) can help traders access improved liquidity, mitigate leg slippage risk, and gain exposure to volatility.

Read the article

CME and Digital Vega to offer joint solution for FX options blocks

A new partnership aims to enable buy-side firms to tap into the benefits of central clearing via OTC-style workflows. Under this arrangement, firms can use Digital Vega’s multi-bank request-for-quote platform to trade blocks of FX options on futures on CME.

Read the article

Increased electronification and transparency for FX swaps

Find out how clients are using the CME CLOB to trade centrally cleared FX swaps - accessing liquidity that is firm, transparent, credit agnostic, and complementary to OTC activity to achieve material capital efficiencies.

View use case

Unique Liquidity, Clear Benefits: Unlocking Asian hour trading potential with CME FX futures

Growing volumes, spreads, and participation levels during Asian trading hours indicate that traders are finding the sufficient, transparent, and secure liquidity they need in the nearly 24-hour CME FX futures market, the largest regulated FX marketplace. Over 180,000 G7 futures on average were traded daily during Asian trading hours as of July 3 - more than 20% of the overall global G7 futures volume, with over 47,000 unique users trading.

Read more

Case Study: Clearing FX forwards to optimize balance sheet and bilateral credit line use

The interbank market is heavily active in FX forward transactions, often using them as a hedge to offset trades versus institutional clients. This activity can generate substantial capital costs against the bank’s balance sheet, as well as exhaust the credit lines that allow bilateral activity. Read our case study on how to optimize OTC bilateral trading of FX forwards by selectively using CME FX futures – a marketplace that cleared over $40 trillion in 2022, with more than 90,000 traders involved.

View case study

In case you missed it: Bank for International Settlements on the foreign exchange market

A recent paper from the Bank for International Settlements is a great FX market overview for newcomers and experts alike, highlighting the key role FX futures traded at CME Group have on price discovery in the FX market.

Read the paper

Assessing the quarterly roll

The June 2023 roll period was characterized by strong growth in quarterly roll volumes and an improvement in roll efficiency, as evidenced by increased open interest transference across the G5 pairs. The amount of open interest transferred was +6% vs. historical averages, while June roll activity throughout the two-week roll period was +4% vs. the prior four roll periods.

Bookmark the FX Quarterly Roll Analyzer Tool to help optimize your futures roll strategy.

View tool

June pace of roll

PAIR OI ROLLED (JUNE 2023) OI ROLLED (PRIOR 20Q) CHNG. VS. AVG.
EUR/USD 85% 78% +7%
JPY/USD 81% 73% +8%
GBP/USD 71% 74% -3%
AUD/USD 88% 72% +16%
CAD/USD 75% 72% +3%

Source CME Group

Displayed Top of Book execution cost, in pips during RTH

PAIR Jun-23 % OF TIME AT MPI
EUR/USD 0.21 97%
JPY/USD 0.2 99%
GBP/USD 0.51 98%
AUD/USD 0.21 97%
CAD/USD 0.2 99%

Source CME Group