FX Spot+ Off to “Strong Start” – CME

Just over a month after launch, CME Group has provided its first update on the progress of its new FX platform FX Spot+, highlighting a peak volume day and a warm welcome from market participants.

CME says 12 May saw over $1.4 billion traded on the new venue, which provides FX futures liquidity in an OTC format via implied matching technology. That day also saw a bump in notional volumes on CME FX Link, which is an integral part of the Spot+ mechanism, to over $5 billion, a more than 70% increase on the May average daily volume, and the highest since Spot+ launched.

Perhaps more pertinently for CME, the group says that in the first month of trading more than 40 clients have “actively traded” on the platform, including 20 banks who had previously not interacted with the FX futures market. Attracting this type of institutions is widely seen as a critical factor in the fortunes of the new market place.

“The launch of FX Spot+ has gotten off to a strong start, with the first month of trading seeing participation from a diverse set of global clients with different trading strategies and across the full range of currency pairs available on the platform,” says Paul Houston, global head of FX products, CME Group. “We’re extremely pleased with the reception for this innovative new platform. We look forward to supporting more clients with their first trades, growing the ecosystem, and enhancing trading opportunities in the process.”

The launch has also been welcomed by market participants. “The FX market continues to be hugely fragmented, which can pose challenges to sourcing liquidity across the different time zones – particularly in times of heightened market volatility,” says Luke Marriott, head of e-FICC, ANZ. “FX Spot+ is an excellent addition to our existing OTC market access as it augments the strong liquidity available on other primary CLOBs such as EBS Market by giving us access to the $100 billion+ a day traded in FX futures but in spot format, improving our ability to manage inherent FX risks and customer execution.”

This point is reinforced by Jimmy Jim, head of global markets, ICBC Asia, who says, “CME FX Spot+ reshapes the spot FX trading ecosystem through futures-derived liquidity, effectively filling liquidity gaps in traditional spot markets during off-peak trading hours and mitigating liquidity drought risks under extreme market conditions.”

It remains early days for Spot+, and the impact on EBS and CME FX futures volume will be keenly watched in coming months, but CME is likely to be very content with the participant reach in particular, especially as more firms who were involved in the testing period, have yet to trade. Ultimately, this will drive its success in bridging listed and OTC FX markets.

This is a point made by Michael Driscoll, head of e-FX spot trading Europe, Commerzbank, who says, “FX Spot+ provides spot trading desks with simple access to the FX futures market. Through implied pricing in the futures market, FX Spot+ enables our spot orders to reach a wider audience offering opportunities for additional business.”

Kevin Love, global co-head of e-FX trading products, RBC Capital Markets, adds, “Although the FX market already hosts a wide range of trading venues, we believe FX Spot+ stands out due to its innovative capability to bridge the spot and futures markets. By democratising access to the highly liquid FX futures market, they have created a truly centralised source of firm liquidity that is complementary to other venues.”