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CME Group FX Fixing Price Methodology

CME Group has rationalized its FX fixing price methodology for both the 9:00 a.m. European-style and 2:00 p.m. American-style fixings. CME Group FX options are exercised at expiration based upon the "CME Group FX fixing price," which is a volume-weighted average price for the nearby currency futures contract released as soon as practicable, respectively, after 9:00 a.m. and 2:00 p.m. Central time (CT), which is also 10:00 a.m. and 3:00 p.m. Eastern time (ET). CME Group calculates & publishes the "fixing prices" daily for both its European-style and American-style FX options, but on option expiration days (usually Fridays), it is used to exercise in-the-money British Pound, Canadian Dollar, Euro FX, Japanese Yen, and Swiss Franc and Australian Dollar options.

The methodology for calculating the CME Group FX fixing price is composed of several "tiers" and is consistently applied to each nearby currency futures contract underlying the European-style and American-style options. Depending upon the pricing history unique to each FX futures contract during the daily calculation interval, the resulting CME Group FX fixing price calculations can be based on varying tiers. For example, the British pound and Swiss franc CME Group currency fixing prices might be based on Tier 2, but the Euro FX and Japanese yen fixings might be based only on Tier 1 on the same day. The "fixing prices" are rounded to the nearest whole (one-point) tick as defined by the respective contract’s Price Increment rule.

"CME Group currency fixing price" calculation interval is 30 seconds (8:59:30 to 8:59:59 and 1:59:30 to 1:59:59).

Tier 1

Volume-Weighted Average Price (VWAP) of underlying futures contract traded on CME Globex is calculated and disseminated on a real time basis during the 30-second intervals ending at 9:00 a.m. and 2:00 p.m. CT. However, if less than three trades by the end of the interval, then go to Tier 2 for the CME Globex bid/ask data (therefore, for 2, 1 or zero trades in 30-second calculation interval, then Tier 2 applies).

Tier 2

Calculate the midpoint of the bid/ask spread during the 30 seconds on a real time basis. Sample at least once per second (minimum of 30 observations). CME Group FX fixing price is the average of the midpoints. For liquid contracts, most of the time fixing prices will be determined via the Tier 1 procedures. If no bid/ask spreads are available during the 30-second interval, then Tier 3 applies.

Tier 3

Use over-the-counter (OTC) vendor contributed spot rates and forward points to calculate synthetic futures "CME Group currency fixing prices." If there are no sales or bid and ask prices during the 30-second intervals preceding 9:00 a.m. and 2:00 p.m. CT at the expiration of either a the European-style or American-style FX options contracts, then Exchange staff will derive the CME Group currency fixing price as a synthetic futures price from quote vendor spot rates and appropriate maturity forward points. The prices will be displayed on Merquote and the CME Group Website.

Knowledge of the forced exercise of all in-the-money options combined with automatic forced abandonment of all at- and out-of-the-money options enable CME Clearing, clearing firms and their customers to predict shortly after 9:00 a.m. and 2:00 p.m. Central time on Friday, which expiring FX options positions will be assigned futures positions. Therefore, customers/clearing firms will know to hedge or trade out of the newly assigned futures positions at a time when the futures and OTC markets are open and trading. Regarding the CME Group European-style FX options specificly, the OTC FX options market also values its expiring options at 9:00 a.m. Central time each day. Therefore, OTC market participants can look at their combined OTC options, futures and European-style futures options books at the same time and make appropriate trading decisions. This compatibility makes CME Group European-style FX options, in particular, appealing to OTC FX options traders.