Driving the IntercontinentalExchange’s (ICE) FX trading products are its Dollar Index futures and options. Although the ICE’s products include an array of different currencies, the Dollar Index composes the majority of FX trading on the exchange.
Introducing competition to its Dollar Index trading franchise is the announcement today that the CME Group will be launching similar products. Based on the Bloomberg variation of the Dollar Spot Index, the CME Group is launching new futures of the index that are set to begin trading on April 4th, 2016, pending regulatory approvals.
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In contrast to the popular Dollar Index, often known by its symbol USDX or DYX, and whose components remain untouched since it was rebalanced with the creation of the euro in 1999, the Bloomberg Dollar Spot Index dynamically adjusts its component currencies. As such, compared to the Dollar Index’s 57.6% weighting against the euro, and no correlation to emerging markets currencies such as the Mexican peso, Brazilian real and Chinese renminbi, the Bloomberg Dollar Spot Index has smaller exposure to the euro and more currencies included.
In this regard, the variety of currency exposure was noted by the CME Group in its public statement as Executive Director of FX Products, Craig LeVeille, stated: “In this time of heightened geopolitical uncertainty, this contract helps meet increasing customer demand for FX products as a tool to effectively manage global risk. We’re pleased to collaborate with Bloomberg to offer a futures contract that provides margin offsets against our existing deeply liquid FX products and a better measure of the U.S. dollar vs. the global market.”
Ben Slavin, WisdomTree Head of Product & Business Development, whose firm is one of the few mutual fund managers tracking the Bloomberg version of the index also stated: “We believe the Bloomberg Dollar Spot Index is a representative benchmark for investors to access, trade or invest in the value of the greenback relative to major global currencies”.