The FX Report

FX Futures | FX Options | FX Link

In this edition, keep up with our latest product developments, learn about the forces driving them. Stay connected to the changes in our market and the wider FX marketplace.

  • 28 Jul 2021
  • By CME Group

UMR Phase 5: Our take

UMR Phase 5 is expected to have a widespread impact on the asset management industry. Although phases 1 through 4 (which began in September of 2016) impacted the largest dealers first and then the largest hedge funds, phases 5 and 6 have often been seen as the most significant due to the sheer number of funds and institutional investors potentially caught by the AANA calculation, with the threshold falling to €/$8 billion in September 2022.

For FX traders using OTC options, UMR can have a significant impact on how much capital is directed toward initial margin and variation margin. Listed FX options can offer a cost-effective, scalable, and accessible way to trade cleared FX options.

UMR Phase 5: A Real Challenge for Real Money

In this article, we discuss the challenges along with the potential impacts and responses of the uncleared margin rules (UMR) on real money accounts.

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Navigating headwinds in FX options trading

In this paper, we explore some of the headwinds facing FX option traders and how expanding their repertoire to include both OTC and listed products can help overcome those challenges.

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Key features of CME FX options:

  • Options are European-style and, for major currencies, the expiration time is 10 a.m. New York/Eastern Time, in line with the OTC convention.
  • Auto-exercised against a transparent, rule-based fix with no contrary instructions.
  • A range of expiries including weekly Monday, Wednesday, and Friday in the short term, supplemented by monthly expiries over the first year.
  • Increased strike granularity offering precision in risk management.
  • Deep, on-screen liquidity in G5 currencies and a wide ecosystem of banks and non-banks providing on-demand liquidity in emerging markets and cross currencies.
  • A no-last-look, first-on-price/first-to-fill model on a central limit order book, allowing participants to work orders and reduce transaction costs.
  • Choice of execution modalities:
    • Central limit order book (CLOB): the FX options CLOB on Globex, CME’s electronic match engine, is a central execution point for firm orders.
    • Blocks: block trading is a form of relationship-based trading that can be carried out bilaterally, with or without the support of a broker, and where the size of the transaction is above a certain threshold.*

*FX options contract specifications can be found here.

**View the block trading market regulation advisory notice here.


Each quarter, we publish The FX Report, which assembles all of the key news, views, and stats the broking community needs to know.