Hotspot Executes First Outright Deliverable Forward FX Trade, NDFs to Follow

The efforts culminated in a one-month EURUSD trade of $100,000 notional value.

CBOE’s institutional foreign exchange venue Hotspot announced today that the first anonymous outright deliverable forward FX transaction was executed on its platform, according to a corporate statement.

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Hotspot has become the first FX marketplace to provide outright deliverable forwards on an anonymous central-limit order book. This new market, which is now available for onboarding and trading, is underpinned by Hotspot’s matching engine located in the NY5 data center in Secaucus, NJ. It’s also based on the company’s credit infrastructure which was extended to cater to the new products, which started with a one-month EUR/USD trade of $100,000 notional value.

In addition, Hotspot’s marketplace for outright deliverable forwards allows prime brokerage clients to post passive quotes, which expands trading activity as market participants are now able to trade without being forced to cross the bid-offer spread.

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According to the BIS’ latest Triennial Survey, trading activity changed unevenly across the FX OTC derivatives market, with volumes of outright forwards climbing to $700 billion in 2016, higher by 3 percent from the $679 billion reported back in 2013.

Following its acquisition and integration of Javelin SEF earlier in 2016, Hotspot said it will formally list non-deliverable forwards (NDFs) in the coming weeks. The process of onboarding participants to trade NDFs is underway, with trading to start later this year.

Hotspot’s clients transacted a total of $554 billion throughout April 2017. The figure is lower by 19 percent when compared to the previous month and higher by 3 percent when compared to a year ago.

Bryan Harkins, Head of US Equities and Global FX at CBOE, commented: “When we initially acquired Hotspot, we made a very public commitment to growing the platform by adding thoughtful, additive functionality, and expanding product lines commensurate with customer feedback and demand. We also made clear any enhancements or expansions would fit our overall ethos of improving market structure for all participants, without compromising the unique dynamics of the FX market.”

“This first, anonymous forwards trade, initiated over central-limit order book is a strong example of this approach, and we are pleased our unique solution, developed in close collaboration with some of our leading customers, will aid in expanding participation in a growing corner of the currency market,” he added.

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