CME Sees Increased Buy-Side “Peer-to-Peer” FX Trading

CME Group says activity on its FX futures and options product suite shows growing adoption from hedge funds and asset managers trading passively on the exchange.

Citing data from its EUR/USD futures by far the most FX liquid product in futures as well as OTC, CME says that hedge fund managers achieved passive execution 64% of the time, while asset managers traded passively 37% of the time. In a release, CME cites “growing interest in peer-to-peer trading benefits”, however there is no data provided on the counterparty to the passive trades executed by hedge funds and asset managers.

The Merc adds that at the December 2021 quarterly roll (where it says on average, 80% of open interest in G5 currency pairs was migrated from December to March) asset managers were able to trade passively for 31% of their central limit order book (CLOB) activity, thus avoiding paying away spread. CME says gross open asset manager positions exceeded $150bn in FX futures for the first time during 2021.

“2021 has seen a dramatic increase in client adoption of listed FX products, with over 250 firms starting to trade new or additional contracts” says Paul Houston, Global head of FX products at CME Group. “The eight minimum price increment reductions we have made within the last three years combined with the ability to trade passively in the CLOB and the expanded network of 20+ liquidity facilitators for relationship-based trading on OTC liquidity means that buy-side firms can achieve enhanced price discovery and further trading efficiencies in listed FX at CME Group.”