Paul Ronan Managing Practitioner, City Practitioners
Paul Ronan Managing Practitioner, City Practitioners

The CME as a liquidity and pricing source

Paul Ronan and Nicholas Hodder examine the challenges that need to be addressed when including new liquidity Pools such as the CME in your business model.

Nicholas Hodder,Practitioner, City PractitionersThe emergence of new liquidity pools for forex trading continues as existing trading venues and newcomers try to differentiate themselves across a growing customer base. Perhaps one of the stronger alternatives to the norm is the Chicago Mercantile Exchange. However there are a number of challenges to overcome when including new liquidity pools in your business model.Spot desks have traditionally benefited from two liquidity sources, EBS and D2 (Reuters Dealing 3000 Spot Matching), both of which connect interbank counterparties. The CME has emerged as a popular third liquidity source for spot traders. Launched in March 2005, this channel allows interbank spot traders to trade with smaller counterparties such as corporates or even day traders. Nevertheless, many banks have yet to exploit this valuable source of liquidity. So what are the essential points for new entrants to understand?Clearly, spot traders require spot prices: the challenge for traders using CME...continued

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