Cboe Partners with UBS to Open New FX Liquidity Channels

The new partnership is intended for a client segment that includes small and mid-sized ‎banks.

Cboe’s spot foreign exchange platform has signed UBS to act as a Central Credit Intermediary for eligible counterparties on Cboe FX. The Zurich-based bank will leverage Cboe’s existing pool of liquidity and bilateral credit relationships to open it up to certain institutional businesses.‎

The new partnership is intended for a client segment that includes small and mid-sized ‎banks, hedge funds and other buy-side institutions, which are experiencing challenges accessing the wholesale ‎‎foreign exchange price matching community – settling all trades exclusively with UBS. These institutions can leverage UBS as a Spot FX Intermediary to gain exposure to a greater number of Cboe FX participants despite the absence of direct credit relationships.

The increase in banking regulation, which mandates increased minimum ‎levels of capital and increases in reporting expenses, has resulted in a lot of ‎banks leaving the prime broking space‏.‏ ‎ ‎

Access to New Sources of Liquidity

The new service is also expected to cater to clients who do not have ‎an FX prime broker, or that need additional credit lines to access either ‎liquidity or execution services. The exit of legacy players in the prime ‎brokerage space will allow new offerings, such as the Cboe-UBS arrangement, to rapidly ‎gain customers and fill the void. ‏

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Commenting on the news, Bryan Harkins, Cboe’s Co-Head of Markets, said: “We know that establishing bilateral credit relationships can be a challenging process for many smaller and regional financial institutions and we wanted to find a way to help reduce this friction in the market. We’re pleased to work with UBS to create a new solution that enables eligible counterparties on Cboe FX to access the bilateral credit lines established by UBS, up to the limit that UBS sets for them, helping to create deeper, more liquid markets.”

Cboe’s institutional spot FX platform saw its average daily trading volumes amounting to $35.7 billion in September 2018, up 2.6 percent month-over-month from $34.8 billion in August 2017.

Looking at its total volumes, Cboe FX inked a figure of  $715 billion in September 2018, down 11 percent on a month-over-month basis from ‎$802 ‎billion in August 2018‎. In a different pattern, the figure was even higher by three percent year-over-year when weighed against $695 billion in September 2017.

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