Evidencing FX futures CLOB liquidity and replenishment rate
With average daily volume of over $80B in 2024, CME Group FX futures rival, and in many cases exceed, the largest OTC FX spot ECNs. This was established in recent articles by the BIS and the TRADE.
Representing over 98% of global volume in EUR/USD futures and 97% USD/JPY futures, the FX futures central limit order book (CLOB) at CME Group has become a critical venue for FX risk management for bank eFX desks and buyside firms alike.
Chart 1
However, given that prices on the CLOB are firm (with no last-look and zero rejects), the size displayed on Top of Book (ToB) does not always give a complete picture of the availability of liquidity. Traders must also consider how quickly the order book replenishes to absorb large risk transfer.
As evidenced below, by working orders over a 120-second window, traders are able to execute vastly higher notional trades in the CLOB than ToB sizes alone would suggest.
Chart 2 shows the peak EUR/USD volume traded on the FX futures CLOB in a single second interval. In a single second, $458M was executed, rising to close to $1B by 30 seconds and $1.5B by 120 seconds.
Additionally, 93% total available price points[1] and 100% time points[2] were traded, highlighting an amply resilient order book with deep liquidity during this concentrated trading window.
Chart 2
Chart 3 shows similar metrics for the Japanese yen as $247M notional of JPY futures were traded on the FX futures in one second, rising to nearly $1.5B after 30 seconds. In addition, 100% traded price points[3] and 98% traded time points[4] were captured.
These metrics again indicated an efficient level of price discovery process and execution effectiveness.
Chart 3
The FX futures CLOB at CME Group is highly liquid with a hugely diverse ecosystem of traders. The order book displays resilience, replenishing liquidity swiftly to ensure continuous, smooth trade execution after initial spike in volumes. Although large size can be executed in a single second, by working orders over a period of time, traders are able to execute vastly higher notional trades in the CLOB than ToB sizes alone would suggest.
For those wanting to trade bilaterally with chosen liquidity providers in a risk transfer manner, CME Group also offers blocks/EFRPs execution on futures.
Additionally, CME Group is set to launch FX Spot+[5] by end of 2024, a new spot FX marketplace, that will allow users to interact with FX futures liquidity in Spot form.
References
- Available price points are 0.00005 intervals.
- Available time points measured in seconds.
- Available price points are 0.0000005 intervals.
- Available time points measured in seconds.
- Pending Regulatory review.
*Data disclaimer: the sample data presented in this article reflects market activity between 06:00 to 22:00 GMT from year 2023.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
