June 2024 proved to be a record-breaking month for MXN futures, with an unprecedented total monthly volume of $3.65T notional traded. This surge in activity underscores the critical role that CME Group futures play during times of significant political and economic shifts. 

In the days leading up to the election, market participants actively utilized MXN futures to hedge against potential risks (Chart 1). This was particularly evident on Friday May 31 when the final polls were released showing a strong lead for Claudia Sheinbaum. Following the release of these polls trading volume surged by 47.2% to $442M notional (15.7k contracts) in just one hour. This dramatic increase highlights the immediate impact of political news on trading activity and the market's use of CME Group MXN futures as an essential source of price discovery and liquidity to quickly adjust positions.

The preliminary election results announced on Monday June 3, which saw Claudia Sheinbaum secure a larger-than-expected victory with 61.18% of the vote, along with her Morena party's strong performance in congressional elections, sparked uncertainty among investors. The Mexican peso plummeted over 4% against the U.S. dollar, with USD/MXN trading at 17.70 by midday London time. 

As the election results unfolded on June 3, traders responded with heightened activity. A total of $7.5B notional (265k contracts) traded on this day alone (Chart 2 shows minute-by-minute volume on this day). The market opened with significant volatility, with USD/MXN jumping from 17.18 to 17.29 in just 13 minutes, accompanied by a spike of $59.9M (2,128 contracts) within a single minute. 

This activity continued throughout the day, with consistent continuous pricing and a peak single minute volume of $112M (3,978 contracts) as official results were announced. Order Book depth remained strong with continuous lit markets despite the heightened volatility during this period.

Sustained high trading volumes continued on Tuesday June 4th in the aftermath of the election results, with a peak of $783M (27,832 contracts) traded in just one hour. The day reached 218,995 contracts, or $6.1B notional volume.

The Indian general election and results showed a similar pattern with traders and investors turning to USD/INR 1-month NDFs traded on EBS Market to hedge their currency risk. Tighter election results than anticipated resulted in increased uncertainty, with the BJP party falling short of its expectations of winning 400 seats and the 272 seats needed out of 543 to form a ruling government. EBS Market volumes over this period reflect that in times of increased volatility traders turn to the liquidity of primary markets to manage their risk. 

EBS Market witnessed strong NDF volumes of $4.03B on Friday May 31 in the lead up to the end of voting, with a peak notional for a single hour of $1.21B as the EMEA market opened (Chart 3). In reaction to exit polls on June 3, Indian stocks had their biggest fall in four years and the rupee tumbled 0.4% against USD. The peak hourly notional volume on this day was $1.025B between 3:00 a.m. and 4:00 a.m. London time, which is 8:00 a.m. to 9:00 a.m. local time in Mumbai, showing that APAC traders were managing their risk via EBS Market.

On June 4, the official day of vote counting and election results, EBS Market saw combined notional volumes of $6.26B for USD/INR 1-month NDFs. The unexpected, reduced majority for PM Modi compared to projections resulted in a peak single hour volume of $1.18B between 3:00 a.m. and 4:00 a.m. London time, as early counting began and another large single hour volume of $1.17B at 6:00 a.m. to 7:00 a.m. London time as counting was still rolling in.

Despite increased volatility the central limit order book remained robust throughout the trading period with average top of book spreads 1.19 pips¹ (only 1.07x normal levels), while the top of the book shown quantity remained around $2.2M in line with normal market conditions.

Throughout both these periods of uncertainty, CME Group FX futures and EBS Market NDFs proved to be an indispensable tool for market participants. The significant increase in trading volumes demonstrates the market's use of these instruments to navigate volatile conditions, with consistent, continuous trading throughout the day (as opposed to bursts of activity followed by periods of inactivity). Investors and traders alike turned to CME Group products for primary market price discovery, to hedge against potential risks and to position themselves for the economic landscape.

With continued political uncertainty on the horizon, including the U.S. Election in November 2024, CME Group FX products will remain a critical tool for managing currency risk.

1. Average top of book bid offer spread on EBS Market MTF Venue 2 a.m. to 12 p.m. London.