Global Markets Exchange Group Limited (GMEX Exchange) has received formal approval from the US’ Commodity Futures Trading Commission (CFTC) to offer its Interest Rate Swap Constant Maturity Futures (IRS CMF) to US firms via GMEX Exchange.
Back in July, GMEX and Eurex launched euro-denominated IRS Constant Maturity Future (CMF) for both trading and clearing on Eurex’s platforms that went live in August 2015.
Both GMEX and Eurex had originally agreed to embark on the partnership back at the end of 2014, having since manifested itself during Q3 2015. The impetus behind the cooperation was the streamlining of CMF contracts on GMEX’s comprehensive platform, whilst leaving trade confirmations and central clearing obligations to Eurex.
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The IRS CMF contracts will also aim to extend the latent benefits of futures trading closer to over-the-counter (OTC) products, at the same time affording a number of efficiencies such as centralized order execution, standardized central clearing, and hedging of interest rate exposure.
In preparation of the regulatory approval, GMEX Exchange has also already signed with several leading firms, including Bank of America Merrill Lynch (BAML), Société Générale, and R.J. O’Brien to utilize the contract, ensuring a robust usage in its inaugural stage of trading.
Overall, the IRS CMF contracts yield a lower margin alternative relative to traditional OTC IRS, which is important for hedging, given the recently increased capital requirements and regulatory mandate. Moreover, the contract’s competitiveness will also benefit from the EU Commission’s mandatory central clearing rules for IRS, which is slated to come into passage in April 2016. Much like the earlier iteration of the contract, the trade confirmation and clearing of the IRS CMF contracts will take place at Eurex.
According to Hirander Misra, CEO and Co-Founder of GMEX Exchange, in a recent statement on the regulatory approval, “With the CFTC approval, we can further expand by offering our IRS CMF to U.S.-based firms. This is an important part of our growth strategy as it enables a wider range of buy and sell-side participants to gain access to our innovative products to facilitate effective hedging of their interest rate exposure.”