CME Group to launch CME FX Link

Maria Nikolova

CME to connect OTC spot FX and FX futures markets by creating spot FX basis spreads.

International derivatives marketplace CME Group today announced it will launch spot foreign exchange (FX) basis spreads called ‘CME FX Link’ on CME Globex, CME Group’s electronic trading platform. This will create the first ever central limit order book between the over-the-counter (OTC) spot FX and CME Group FX futures markets. It is expected to launch in Q1 2018 and will provide OTC FX market participants with a more efficient way to access and use FX futures as part of their overall trading activity.

The CME FX Link enables trading of an OTC spot FX contract and a CME Group FX futures contract via a single spread trade on CME Group’s liquid and transparent CME Globex trading platform. This allows efficient credit line management across both markets.

CME Group is partnering with Citi’s FX Prime Brokerage unit to act as central prime broker for the spot FX transactions resulting from the spread. This will allow participants to leverage existing OTC FX interbank credit relationships and the scale of the established OTC FX prime brokerage network.

Paul Houston, Global Head of FX Products, CME Group says, “By strengthening the integration between futures and the OTC FX marketplace, CME FX Link will enhance access to our deeply liquid FX futures market. OTC FX market participants will benefit from the capital and regulatory advantages of listed futures as well as optimizing credit lines through facing a central counterparty.”

Sanjay Madgavkar, Global Head of FX Prime Brokerage, Citi says, “Citi is excited to partner with CME Group on this innovative new offering. By applying the capabilities of our leading Global FX Prime brokerage business, we believe we can help FX market participants to manage their exposures across both markets more effectively.”

Alex Gerko, CEO, XTX says, “CME’s new spot FX basis offering will allow FX participants to better access the liquidity offered in CME Group’s FX futures market, providing a more efficient and scalable trading mechanism to manage resulting exposures across OTC spot and CME FX futures.”

Tom Gentile, Head of FX trading, Crabel Capital Management says, “This new offering can bring increased transparency to the FX marketplace, allowing buy-side firms to continue leveraging their existing OTC spot FX liquidity while enabling them to efficiently move and hold forward exposures via the FX futures market.”

John Apperson, COO, Greenwave Capital Management says, “CME’s FX Link can allow participants to transition from their current OTC FX activities into FX futures quickly and efficiently; making it a value-added tool for realizing the benefits of FX futures and further strengthening the link between both markets.”

The FX basis spreads will be available in the new release testing environment in November and for first trade in Q1 2018 pending regulatory review and will initially be supported for six currency pairs: EUR/USD, JPY/USD, GBP/USD, CAD/USD, AUD/USD and MXN/USD. The spreads will be offered against each of the front three CME FX futures expiry months.

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