CME Unveils FX Spot+ Platform, Blending Spot and Futures Markets

CME Group, a US derivatives exchange, has unveiled plans for the launch of 'CME FX Spot+', an innovative spot foreign exchange (FX) marketplace.

This new platform, slated for client testing in the latter part of 2024, seeks to bridge the gap between cash market players and the existing FX futures liquidity offered by the company.

Breaking new ground, the spot FX market participants will now have access to CME FX futures liquidity within an over-the-counter (OTC) spot environment. This integration takes place within a central limit order book framework, ensuring utmost transparency. Simultaneously, users of FX futures markets will gain widened access to OTC FX liquidity.

At the heart of CME FX Spot+ lies FX Link, a tool that enables a tradable spread between OTC spot FX and CME Groups FX futures. This pivotal feature acts as a conduit, linking liquidity across both trading spheres.

Ensuring accessibility, CME FX Spot+ will be accessible through the CME Globex network, including the existing EBS Market Globex connectivity. This move guarantees seamless access for the global EBS spot FX customer base to this supplementary liquidity pool.

Paul Houston, the Global Head of FX Products at CME Group, emphasized that integrating futures and spot markets under CME Group provides centralized and accessible liquidity in the typically fragmented FX market. Houston envisions that CME FX Spot+ will furnish access, transparency, and trading prospects across both spot FX and FX futures markets, delivering advantages to participants in both realms.

Houston emphasized that the introduction of the new spot FX marketplace, intricately connected with the FX futures liquidity alongside the FX futures and EBS offerings, demonstrates the role of having futures and spot markets at CME Group in fostering accessible and centralized liquidity within the fragmented FX market.

The CME FX futures and options market has experienced substantial growth, with an average notional daily volume surging to $81.8 billion in 2023, marking a rise from $76 billion in 2021. This increase suggests an escalating trend where more investors are turning to exchange-traded derivatives as an alternative to over-the-counter (OTC) products. This shift is partially driven by the need to optimize funding and manage the capital impacts of regulations such as SA-CCR (Standardized Approach for Counterparty Credit Risk) and UMR (Uncleared Margin Rules).

In August 2023, CME Group consolidated its diverse FX-related businesses into a unified unit. This unit encompasses FX futures, options, cash, and OTC FX businesses and is spearheaded by Paul Houston, leveraging his extensive seven-year experience overseeing CME Groups futures and options business.