What is the Mutual Offset System?
The Mutual Offset System (MOS) is an innovative partner program between CME Group and Singapore Exchange enabling traders to open a futures position on one exchange and liquidate it on the other. It allows investors to manage risk, access liquidity at two exchanges, and reduce the cost of trading in foreign markets in one single marketplace.
Established in 1984, MOS was one of the earliest and most successful exchange collaborations in the history of the derivatives industry.
Example
A trading group routinely carries open positions at both CME Group and SGX. Normally, this would involve margin requirements from both exchanges. By utilizing MOS, the group would only need to post margin at one clearing house on the net position after the transactions clear.
Prior to order initiation, it is designated as a MOS trade with SGX to carry the position. The group buys five December Yen Nikkei 225 futures at a price of 28,610 on CME Globex. The trade is sent through the MOS inter-exchange clearing link to SGX. Upon receipt of the trade, SGX clears it at the original trade price. A position of long, five December Yen Nikkei 225 futures at a price of 28,610 is created in the trader’s account with SGX.
The group pays SGX the required margin on the trade and can offset their existing short position on SGX with the long position established via MOS at the current market price.
The Mutual Offset System is available for the following contracts:
- Yen Nikkei 225 futures contract
- Dollar Nikkei 225 futures contract
- E-mini FTSE China H50 futures contract
- E-mini FTSE Emerging Index futures contract
The MOS affords market participants greater versatility, flexibility, and liquidity to manage their positions between two exchanges during all international time zones ‒ along with the cost advantages of spread margining and singular transaction fees.
For additional information on the Mutual Offset System, click here.