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.

  • 25 Jan 2022
  • By CME Group

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IN NUMBERS: Q4 2021*

$74.6B average daily volume traded in CME FX futures and options
$278.5B in CME FX futures and options open interest
$57B average daily volume traded on EBS **
*Data as of December 31, 2021
**EBS data excludes forwards

More customers migrate open positions into FX futures than ever before

December 2021 closed with the largest open interest record ever achieved across futures and options ‒ exceeding three million contracts ($293.7 billion notional) for the first time.

Macro factors, including UMR and SA-CCR, have combined with the fundamental benefits of cleared, listed derivatives as a complementary pool of liquidity that can be accessed without an ISDA to accelerate client adoption of listed FX futures and options and deliver record figures.

Source: CME Group

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Analyzing 'the turn' in FX swaps – using FX Link – the only cleared liquidity pool for FX swap risk

In December 2021, participants focused on the annual ‘turn’ in FX swaps – where there is typically a bump in in funding rates as cash is repatriated and applied to corporate and banking balance sheets.

The impact of the 2021-2022 year-end ‘turn’ was evident in CME FX Link. The market’s expectations for the differential in year-end funding rates can be derived from pricing data. This showed a more subdued year end than the previous year, with rate expectations steadying throughout December.

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Large open interest holders: Driven by the rise of the buy-side as they increasingly choose futures

In 2021, the number of large open positions in CME FX futures grew +8.6% year on year (standing at 1,244 as of Jan 4, 2022) as did the largest-ever number of gross notional positions held by asset managers in EUR/USD FX futures.

In combination – they confirm a notable trend of consistent adoption of listed futures and options by the buy-side community.

Source: CME Group

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To block or not was the question: The answer is now yes

In 2021, our network of block pricing providers grew to more than 20 firms and now includes more leading U.S. and European banks alongside specialist non-bank market makers offering block liquidity specifically for FX options.

Demand for blocks, and pricing providers, has increased because they enable participants to access our liquidity and gain the capital and credit efficiencies of our markets, whilst operating like they do in the OTC market – negotiating deals privately with their chosen counterparties.

That’s why block volume across futures and options increased by 38% from Q4 2021 vs. Q4 2020, and trades increased by 63% over the same period. It’s not just the network that’s grown – it’s also participants’ use of this type of modality to achieve their strategy.

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Understand why FX blocks and EFRPs are growing in popularity ‒ and why BNP Paribas, Morgan Stanley, Santander, and Societe Generale are active participants in this part of the market.

FX Micros: Flipped (a few) to fulfill new demand

Micro-sized contracts are available at 1/10 of a standard size contract in our G7 pairs, INR, and CNH. The micro contracts are particularly attractive to individual active traders as a less margin intensive means of accessing our liquidity.

Three micro contracts have now been flipped into ‘OTC terms’ – USD/JPY, USD/CHF, and USD/CAD – to fulfil trader and broker demand for a small-sized contract that aligns with OTC convention. As a result, we are delisting the JPY/USD micro contract after the March expiry (March 14) so participants can concentrate their activity, creating a simpler risk management mechanism. The standard remains the same. 

Across our FX Micros suite, Q4 2021 volume reached 49.5K contracts (+30% vs. Q3 2021).

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