CME Group Launching CME FX Link, Bridging OTC FX & Futures Markets

The new service will create a central limit order book between the OTC spot FX and CME Group FX futures

CME Group has unveiled the launch of a new spot foreign exchange (FX) service called CME FX Link on its electronic trading platform, CME Globex. In doing so, the derivatives marketplace giant will look to create one of the industry’s first ever central limit order book between the over-the-counter (OTC) spot FX and CME Group FX futures markets.

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The group is targeting a Q1 2018 date for the launch of CME FX Link, which will feature spot FX basis spreads. The primary impetus behind the new offering will be facilitating OTC FX market participants with improved access and utilization of FX futures as part of their overall trading activity.

Paul Houston, Global Head of FX Products, CME Group commented: “By strengthening the integration between futures and the OTC FX marketplace, CME FX Link will enhance access to our deeply liquid FX futures market. OTC FX market participants will benefit from the capital and regulatory advantages of listed futures as well as optimizing credit lines through facing a central counterparty.”

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Streamlined credit line management

The launch of CME FX Link will be one of the first services of its kind in the industry, emphasizing a streamlined central limit order book for market participants. More specifically, the new service will help allow trading of OTC spot FX contracts and CME Group FX futures contract through a singular spread trade.

This can be jointly accomplished via CME Globex trading platform, aiming for improved credit line management across both markets. The symbiosis will also look to alleviate a current disparity between such markets, helping improve access to a deeper liquid FX futures market. The service also builds on a rapidly improving demand for futures and FX trading at CME Group in recent months.

Sanjay Madgavkar

CME Group has also partnered Citi’s FX Prime Brokerage unit, which will act as a central prime broker for the spot FX transactions resulting from the spread. The alliance is integral for CME FX Link, as it will allow market participants to leverage existing OTC FX interbank credit relationships and the scale of the established OTC FX prime brokerage network.

“Citi is excited to partner with CME Group on this innovative new offering. By applying the capabilities of our leading Global FX Prime brokerage business, we believe we can help FX market participants to manage their exposures across both markets more effectively,” explained Sanjay Madgavkar, Global Head of FX Prime Brokerage, Citi.

Alex Gerko, CEO, XTX also noted: “CME’s new spot FX basis offering will allow FX participants to better access the liquidity offered in CME Group’s FX futures market, providing a more efficient and scalable trading mechanism to manage resulting exposures across OTC spot and CME FX futures.”

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