FX Spot+ is a new spot central limit order book that seamlessly connects OTC traders to futures liquidity and the futures client ecosystem helping to bring the two markets together. A number of firms active in FX cannot natively interact with FX futures liquidity or the customer ecosystem because they don’t have clearing or futures market relationships. This means some market participants can’t interact with both FX futures and primary venues.
To solve this, CME Group has launched FX Spot+, which translates futures liquidity into spot terms, expanding liquidity access to OTC traders, without the need to establish futures market relationships, or manage the forward risk inherent in futures contracts.
FX Spot+ leverages implied matching technology and basis spread of FX Link to atomically link the FX futures and OTC spot FX markets, providing enhanced liquidity and trading opportunities for FX futures and OTC spot FX traders alike.
“CME Group’s FX futures trade material volumes across all of the G7 currency pairs as well as in Mexican peso, so allowing Spot traders access to that liquidity via FX Spot+ has the potential to have a huge impact on FX market structure.” said Paul Houston, Global Head of FX, CME Group.
Resting liquidity in FX futures and the FX Link spot-futures spread will combine to represent standalone resting spot interest in FX Spot+. The result will be futures liquidity with the forward points removed, allowing spot participants access to new liquidity. In addition, resting orders in FX Spot+ will combine with FX Link to represent resting liquidity in FX futures, increasing passive matching opportunities for spot participants previously not possible.
How FX Spot+ works
FX Spot+ is a firm, all-to-all spot FX central limit order book (CLOB) located in CME Group’s Chicago matching engine, with implied technology enabled to connect the OTC spot and FX futures marketplaces. A central counterparty will directly (or indirectly via FX prime brokers) provide credit to trade on FX Spot+. The implied technology enabled through FX Link will represent FX futures liquidity in spot form and vice versa.
Implied out: Resting FX futures and FX Link orders will be combined to represent resting FX Spot+ orders in notional terms
Implied out: Resting FX Spot+ and FX Link orders will be combined to represent resting FX futures orders in contract terms
Implied in: Resting orders in FX futures and FX Spot+ will be combined to represent resting orders in FX Link in contract terms
All currency pairs will be quoted and matched in OTC convention and in notional units. Contracts are translated by the CME Globex matching engine from contract to notional terms and vice versa. Native orders have priority over implied orders on the FX Spot+ CLOB. Any residual quantity following matches that is less than the minimum order size will be automatically canceled by the engine. Details such as supported currency pairs, minimum price increments, and minimum and maximum trade sizes can be found on the FX Spot+ webpage.
