CME Posts FX Volumes, Decline by 1% in January, But Option Trading Grows

January FX volumes drop 1% at the CME compared to December 2014, but options trading buoyed by speculation in euro

Early indications are that despite last month’s black swan Swiss franc event, FX volumes traded in January have remained around the strong levels experienced during the last four months of 2014. Figures from the CME Group support this notion, with average daily volumes (ADV) of futures and options only declining slightly by 1% to 945,940** contracts when compared to December 2014’s activity.  On a dollar notional level, volumes averaged around $103 billion in daily trading. Outperforming and showing growth were FX options trading, of which ADV grew 15.6% to 96,146 contracts. The spike in options trading has been consistent with previous trends where the product has outperformed futures growth during periods of rising volatility.

In individual currencies, the euro led all products with a total of 5,560,315 contracts traded. The increase in January’s euro volumes occurred as the currency hit multi-year lows against other major currencies following the ECB’s most recent monetary policy meeting. Also of note, despite volatility returning, Swiss franc futures volumes declined versus December. The fall in activity is believed to be attributed to an increase in minimum margins established by the CME Group for franc trading.

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CME Group January FX Volumes
CME Group January FX Volumes

Worth noting is that even among options, franc volumes decreased, showing an overall decrease of trader involvement in the currency. Also possibly affecting volumes has been an overall increase in spreads for franc products since volatility returned to the currency.

Like futures, trading in euro options led all products, with activity in the currency rising 33% on an average daily basis to 61,116 contracts. The rise in euro options trading indicates increased speculation among traders on the direction of the currency following more aggressive monetary policy actions by the ECB.

**In the CME’s internal calculations, they use a 20 day period for January.  According to their calculations, Month over Month contract volumes rose by 4% and to $108 billion from $107 billion on a notional rate.  Forex Magnates ADV calculations use a 21 day period for the CME which compares to calculations used by major FX platforms.  The difference stems from the January 19th Martin Luther King Holiday where FX trading was halted for five hours in recognition of the holiday, and the entire day removed from the CME’s trading period calculation.

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