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Exchanges & Clearing

Digitisation at CME: What Does it Mean? Galen Stops sat down at Consensus 2017 with Sandra Ro, executive director and head of digitisation at CME, to talk about the nascent technologies the exchange group is exploring and how they could improve the way that assets are traded. Broadly speaking, CME Group’s “digitisation” effort can be divided up into two distinct categories. One is related to how blockchain, or distributed ledger technology (DLT), can replace or improve core infrastructure in financial markets, the other, interestingly, is the “digital tokenisation” of physical assets.
Euronext Buys 90% Stake in FastMatch European exchange group Euronext has become the latest to buy into the OTC FX market, announcing it has acquired around 90% of FastMatch for $153 million initial cash consideration. FastMatch’s management will remain invested with around a10% interest, with minority rights. Closing is subject to regulatory and anti-trust approvals, and is expected to occur in Q3 2017. Euronext says the deal is part of its strategy to actively leverage its balance sheet to capture value accretive opportunities and to accelerate growth and diversification of our revenue base in line with its strategic plan ambitions.
LMAX Exchange Reports Strong 2016 LMAX Exchange has reported record high profitability with reported annual EBITDA of £5.6m in 2016. This marks the company’s strongest financial performance to date and, it says, “demonstrates its rapidly expanding footprint in the global FX market – particularly remarkable in the face of a difficult period for the spot FX industry, which has seen a volume decline of 19% over the last three years”. The EBITDA of GBP 5.6 million is a 300% increase on 2015, the firm says that gross profit was GBP 20.8 million, up 33% year-on-year.
CME to Add New Triangulation Products CME Group will expand the number of FX products it offers triangulation functionality in on May 14 Contracts in premium quoted (PQO) and volatility quoted options (VQO) on yen, sterling and Swiss franc futures will be available on that day (for trade date May 15) and the exchange is planning to go live with euro and Canadian dollar options on June 18 for June 19 trade date. Triangulation links the books via implied calculations, combining premium quoted orders with futures orders to create and post implied volatility into the volatility quoted book.
Report Shows Growth in FX Derivatives Market…Or Does it? The World Federation of Exchanges (WFE) has released a new report showing that trading in currency derivatives grew 10.4% year-on-year in 2016, but this figure doesn’t quite tell the whole story because the driver of the WFE’s well-spun report how the data is measuring the number of contracts traded and not their notional value – it is also heavily skewed by certain domestic factors that, while giving the impression of a growing global market, actually have little or no impact internationally
CME Europe, CME Clearing Europe to Shut by Year-End CME Group today announced that it intends to close its London-based derivatives exchange and clearing house, CME Europe and CME Clearing Europe, by year-end 2017. During the coming months, CME Group says that it will work closely with all market participants and regulators to ensure a smooth transition and an orderly wind down of business operations, including the provision of CME Group market alternatives for actively traded products on CME Europe. "While Europe continues to be a critically important and expanding market for CME Group, with average volumes of more than 2.6 million contracts per day from European clients during 2016, our customers have shown that they prefer to access our global products, deep liquidity and greater capital efficiencies through our U.S. infrastructure," says William Knottenbelt, CME group senior managing director, international.
Amundi Live on CDSClear Clearing house LCH has announced that its first European buy-side client is now live on CDSClear with Amundi now clearing credit default swaps (CDS) at via its clearing broker BNP Paribas. LCH says it has seen activity on its service grow significantly in recent months and that CDSClear now has 13 active clearing members. From Q2 2017, end-users trading CDS will be able to connect via two additional clearing brokers, which will be offering clearing through LCH SA, the firm adds.
SGX Must Improve Operational Resilience – MAS The Monetary Authority of Singapore (MAS), has directed the Singapore Exchange (SGX) to implement measures to enhance its recovery processes and operational resilience. The directive comes after a supervisory investigation into the trading disruption that occurred in the market on 14 July 2016. The measures include recommendations by the Industry Working Group (IWG), which comprises SGX and industry stakeholders. SGX will contribute $1.5 million to co-fund the costs that may be incurred by brokerage firms to implement the IWG measures.
Eris Launches New Market Data Product Eris Exchange has launched a new market data product, Live Eris Swap Curve, which offers real-time valuations and analytics for Eris Standard Swap Futures.
CME to Change FX Option Expiry Process CME Group says it will change the exercise and assignment rules for all options on FX futures contracts. On March 24, CME will amend how it handles options that end up precisely at the money on expiry. Currently, CME options that are at least one tick in or out of the-money at expiration are automatically exercised or assigned, and if the final underlying price happens to occur exactly at a strike price, both calls and puts at that strike are also expired without exercise.