CME Hits FX Open Interest Record

Open interest, the measure of the number of active positions market participants are holding on CME Group’s FX products, exceeded three million contracts on December 14 for the first time ever. The notional value of the positions was $293.7 billion, which was not a new record high.

The number of large positions held by customers in CME FX Futures stood at 1,260, up 10.2% on the same time the previous year, but short of the record above 1,300 in early 2020. CME says this illustrates the continued growth in the listed FX ecosystem which was driven by a combination of macro factors including UMR and SA-CCR (Uncleared Margin Rules and standardised approach for measuring counterparty credit risk) along with the fundamental potential efficiencies of cleared, listed derivatives.

Regulation is no doubt influencing matters, the UMR threshold was reduced to $50 billion notional in September, and falls again in September 2022, and CME says that FX options in particular, have benefitted from the potential initial margin efficiencies that are available. Alongside UMR, SA-CCR, a rule that overhauls how banks calculate their capital requirements for counterparty credit risk, has underpinned further interest from banks in the potential efficiencies of clearing to help optimise their capital footprint for FX trading.

“Record open interest reflects the growing ecosystem of clients active in our listed FX marketplace, which has been enabled by reductions in the cost of trading along with robust liquidity – both in the central limit order book as well as on a disclosed, relationship basis direct with over 20 entities now providing block liquidity,” says Paul Houston, CME Group global head of FX. “Heading into 2022, with the UMR threshold falling from $50 billion to $8 billion, we anticipate more firms looking to access the complementary liquidity, as well as the potential capital and cost efficiencies offered by our listed FX products, to optimise their FX exposure.”