While some of the Eurex-listed futures and options contracts are gaining traction, Alfred Schorno, Managing Director 360T Group, says that it is clear that some aspects of the product definition, especially the trading times available at present, do not suit a global market.
Work is underway to change this. In September, more currencies including Yen, Australian and New Zealand dollar, were added to the product range, and contract specifications continue to be improved to make the contracts more suitable to today’s market conditions, such as changing the tick sizes to align the contracts better with the OTC market and reducing block sizes.
Bigger changes are in the pipeline. In 2017, Eurex will extend its trading hours for FX, as well as launch a Rolling Spot Future. Schorno says “This will position the Deutsche Börse Group as a strong competitor in the FX market.”
“We have always wanted to satisfy the interest of FX clients in a European product. A number of European clients, end-users like asset managers and exchange traded funds (ETFs), say they would actually prefer to trade original European contracts where possible, rather than with US products that have just been copied into London.”
Eurex, which is now Europe’s biggest futures and options exchange, first went live with FX futures and options in July 2014. The contracts were designed to combine best-practice OTC market conventions with the transparency of exchange-traded and centrally cleared contracts in response to the changing regulatory treatment of OTC instruments.
Says Schorno: “Times have changed. FX clients are looking for something which is more ‘controllable’. We have a number of asset manager customers who, due to these numerous discussions around best execution in the OTC market, are considering using on-exchange products for the spot and then swapping the transactions to forwards for their clients, simply to get around the WM 4pm fixing issue. We see a totally different dynamic in the market today compared to when discussions about a rolling spot product and additional on-exchange products first started in Europe some years ago.”
Going forward, 360T’s client base will enjoy having an unparalleled breadth of product choice with OTC and exchange-traded FX alongside each other, with an additional separate CLOB (OTC central limit order book) complementing this with its rulebook well-tailored for 360T clients’ needs.
360T and Eurex are keen to complete the range of trading execution mechanisms, including OTC RFQ, RFS, executable streams, anonymous OTC trading including a central limit order book, plus rolling spot and classic styled futures – both on-exchange as well as off-book negotiated block and EFP functions soon.
“We are spending time with our clients helping them plan for a future where they have choice of what product and execution style they can or should use for the trade they need to do,” adds Schorno.
The next 12 months will see 360T and the German exchange continuing to position themselves as a viable alternative to the OTC market and, following the outcome of the recent Brexit vote in the UK, a serious contender in the provision of a European-based exchange-traded FX product.