CME Group Sees 280% Jump in Block and EFRP FX Clearing

by Arnab Shome
  • Demand for such clearing techniques recorded a sharp increase in recent months.
  • These trades are executed on the OTC markets.
CME

CME Group announced on Tuesday that the trading activities in blocks and exchange for related positions (EFRPs) across its offered foreign exchange (forex) products jumped by more than 280 percent year-to-date when compared to the previous year.

Blocks and EFRPs allow the clients of the exchange to clear trades with over-the-counter liquidity for FX forwards, NDFs and FX options. CME has more than 20 such liquidity providers, offering blocks, large privately negotiated trade orders and EFRPs.

The demand for FX futures blocks jumped by 187 percent, whereas FX futures EFRPs and FX options blocks saw an uptick of 457 percent and 316 percent, respectively.

“The ability to lean on OTC liquidity with chosen relationships in order to obtain a price to access clearing for FX FWDs, NDFs and FX options is resonating with customers, especially in the real money community,” said CME Group’s Global Head of FX, Paul Houston.

“The execution-style of trading a block or EFRP on a relationship basis with their chosen liquidity provider is synonymous with how many of these participants trade in the OTC market today.”

FX Derivatives Are in Demand

Further, the American exchange highlighted that FX options volumes in contract terms last month jumped by 21.7 percent from the same month in the previous year, thus contributing significantly to Mach’s average daily trading volume of $110.9 billion.

“Block trading represents the best of both worlds, combining the liquidity and flexibility of OTC trading together with the central clearing that's a benefit of the listed space,” John Rothstein, the CEO of Optiver UK, said. “For institutional investors seeking to execute large transactions at a single price, it’s become a quick and convenient way of doing so, particularly when markets are volatile.”

Meanwhile, the CME Group reported a 22.5 percent year-over-year jump in 2021 operating income, while its revenue for the year increased by 4.4 percent.

CME Group announced on Tuesday that the trading activities in blocks and exchange for related positions (EFRPs) across its offered foreign exchange (forex) products jumped by more than 280 percent year-to-date when compared to the previous year.

Blocks and EFRPs allow the clients of the exchange to clear trades with over-the-counter liquidity for FX forwards, NDFs and FX options. CME has more than 20 such liquidity providers, offering blocks, large privately negotiated trade orders and EFRPs.

The demand for FX futures blocks jumped by 187 percent, whereas FX futures EFRPs and FX options blocks saw an uptick of 457 percent and 316 percent, respectively.

“The ability to lean on OTC liquidity with chosen relationships in order to obtain a price to access clearing for FX FWDs, NDFs and FX options is resonating with customers, especially in the real money community,” said CME Group’s Global Head of FX, Paul Houston.

“The execution-style of trading a block or EFRP on a relationship basis with their chosen liquidity provider is synonymous with how many of these participants trade in the OTC market today.”

FX Derivatives Are in Demand

Further, the American exchange highlighted that FX options volumes in contract terms last month jumped by 21.7 percent from the same month in the previous year, thus contributing significantly to Mach’s average daily trading volume of $110.9 billion.

“Block trading represents the best of both worlds, combining the liquidity and flexibility of OTC trading together with the central clearing that's a benefit of the listed space,” John Rothstein, the CEO of Optiver UK, said. “For institutional investors seeking to execute large transactions at a single price, it’s become a quick and convenient way of doing so, particularly when markets are volatile.”

Meanwhile, the CME Group reported a 22.5 percent year-over-year jump in 2021 operating income, while its revenue for the year increased by 4.4 percent.

About the Author: Arnab Shome
Arnab Shome
  • 6315 Articles
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About the Author: Arnab Shome
Arnab is an electronics engineer-turned-financial editor. He entered the industry covering the cryptocurrency market for Finance Magnates and later expanded his reach to forex as well. He is passionate about the changing regulatory landscape on financial markets and keenly follows the disruptions in the industry with new-age technologies.
  • 6315 Articles
  • 80 Followers

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