Rahul Gupta, Senior Director, FX Products at CME Group explores the growing significance of FX futures, now a foundational market for price discovery and risk transfer.
The FX Futures market has often intrigued the traditional OTC trader, viewed as a parallel marketplace with independent market interest and risk, fascinating enough for most to keep an eye on, but leaving many not entirely sure of how to participate in it. The last few years have, however, seen a wave of change coming through. Growing adoption from buy-side and sell-side firms alike has helped to further position the FX futures marketplace to be foundational for market price discovery and risk transfer. A number of recent FX liquidity and market structure reports from leading bank participants and financial institutions discuss the now established presence of Futures liquidity as part of the overall infrastructure used for price discovery, distribution and hedging of market risk.*
Listed FX trading volumes, albeit a part of the huge $7.5 trillion a day global FX market, have seen multi-year growth in recent times. CME Group’s FX Futures and Options average daily volume of ~$96 billion in H1 2025, and an all-time highest single day volume of $314 billion reached in 2024, exceeds many OTC FX venues today. Aside from the headline volume growth, what lends greater significance to its Futures marketplace is the diversity of participation and the underlying transparency of trading amidst a highly fragmented FX market. Futures trading is active in a broad set of over 50 currency pairs including majors and emerging market pairs, and among a comprehensive client base of hedge funds, asset managers, corporate, banks, proprietary trading firms, retail brokers and commodity trading advisors (CTAs) – making the futures ecosystem more complete than ever. When trading in a central limit orderbook, liquidity begets liquidity, and the compound effect of greater client participation has resulted in futures proving to be a reliable liquidity pool for traders through varying market conditions, highly complementing the capabilities of the OTC markets to provide traders with trusted, deep liquidity as and when its needed**.
What’s driven the growth of FX futures?
FX futures transactions are centrally cleared, mitigating counterparty credit risk, without requiring market participants to use bilateral credit lines or ISDA documentation. Since the implementation of SACCR (standardized approach to counterparty credit risk) in the calculation of risk-weighted assets, some market participants have had to cope with increases in capital requirements for trading FX derivatives, especially with FX forwards, swaps and options. However, firms trading in cleared FX derivatives instead can free up their bilateral credit lines, and expect to reduce their capital footprint, resulting in lower costs and arguably better pricing.
Further, transparent and centralized margining of positions allows for efficiencies that relieve cost pressures that have risen due to Uncleared Margin Rules (UMR) for buyside firms and for Banks who service them. Centrally cleared FX futures and options at CME Group are provided with margin offsets between currencies, tenors (i.e Sep vs Dec in the same currency pair) and other cleared instruments like U.S. Treasury and SOFR futures traded at the Exchange. For the deposit of initial margin, market participants can choose from a wide range of currencies and non cash securities including government bonds, treasuries, letters of credit, gold and certain corporate bonds. Variation margin, in quote currency of the pair, is typically in USD to make it more efficient from a funding and processing perspective for customers and FCMs.
Need for standardization and transparency
The OTC FX market provides a great deal of flexibility, with bilateral trading facilitating transactions in a plethora of currency pairs, with settlement dates priced out to multiple years, and a range of products supported including spot, outright forwards, swaps, options and complex derivative structures. With a market so vast and complex, a degree of standardization is much needed for achieving transparency and operational efficiency. The Spot market achieves this to a certain extent, and has been increasingly well complemented by the growing Futures marketplace for derivatives trading. FX futures contracts are structured and standardized – typically trading to fixed monthly and quarterly (IMM) settlement dates. Trading in standardized contracts has allowed for liquidity to concentrate and build up in fixed tenors (often IMM dated), ultimately leading to increased efficiency for market participants. Using futures liquidity, market participants can either trade the outrights directly, or trade the calendar spreads between two listed dates (September versus December for example).
Exchange traded FX Average daily volumes and Open interest in June 2025. Source Futures Industry Association (FIA) . Converted from contracts to equivalent million USD notional using month end exchange rates.
The proliferation of OTC FX venues and distribution of electronic pricing in modern times has also led to an increased need for establishing a market standard that is transparent and reliable. FX futures and listed options central limit orderbooks (CLOBs) facilitate anonymous order to order matching, with no concept of last look or order rejects, making the liquidity interaction simpler and transparent. They allow for any market participant to place resting orders, and in doing so trade passively (earn the bid-offer spread cost), or aggress and consume firm liquidity, effectively creating a cleaner and transparent mode of risk transfer.
Breaking barriers to entry: bringing the FX market together
FX futures enable segregation of credit from liquidity interaction, allows for equal, all-to-all order-based trading on its central limit orderbook (CLOB), and provides market data and information that is accessible to everyone. The large network of Futures clearing members (FCMs) supporting access and a global footprint of client coverage at CME Group has led to new entrants to the FX futures marketplace incrementally over the last few years. The ecosystem has grown by leaps and bounds to include global and regional banks, hedge funds, asset managers, corporate and retail accounts, to a total of ~1,100 global entities having traded its FX futures and options in 2024.
On March 5, 2025, open interest (OI) in CME Group FX futures and options hit a record 3.73 million contracts, representing ~$347.5 billion in notional value.
FX futures contracts at CME Group are designed to be as fungible to OTC as possible, with most of the contracts requiring physical delivery in line with the OTC market and leveraging the main cycle of CLS (where applicable), and others are cash settled to market standard benchmarks. This means that on settlement of a deliverable futures contract like EURUSD for example, Euros and US dollars are paid and received on T+2 basis in line with OTC standards. For a non-deliverable currency like Brazilian Real (BRL), the futures contract on settlement is cash settled in US dollars based on the BRL PTAX rate provided by the central bank of Brazil, in line with OTC convention.
The development and growth of unique tools like FX Link (tradeable spot to futures basis) has further bridged the liquidity between futures and OTC markets, enabling traders to manage risk interchangeably and seamlessly. FX Link services multiple use-cases, one of which is enabling market participants to move their OTC Spot risk to cleared futures (to achieve margin and capital efficiencies), and vice versa, effectively operating a ‘live’ Spot-to-Futures basis marketplace. It is increasingly seen as a complementary source of OTC FX swap liquidity with firm, transparent pricing that is tradeable through a credit-agnostic, anonymous, all-to-all marketplace.
CME FX Spot+ provides OTC users access to FX Futures liquidity, makes OTC liquidity available to FX Futures participants, creates new incentives to participate in FX Link, and increases the value of EBS connectivity/sessions
Serving the established demand for bilateral trading in the FX marketplace, and facilitating greater flexibility of trading, there has been an increased adoption for Blocks and EFRPs (Exchange for related position) as well. Positions in outright futures, calendar spreads and options can be established through the mechanism of Blocks and EFRPs too, complementing the otherwise execution via central limit orderbooks. Through Blocks, clients can privately negotiate and trade cleared FX futures and options with chosen counterparties (liquidity providers) for listed contracts at a risk-transfer price. With the EFRP route, market participants can establish FX positions through traditional OTC workflows or already hold an existing OTC risk, and then move those to central clearing. A greater number of market-making banks seem to have overcome the operational challenges of adapting to the newer technologies and processes here, and invested in integrating end-to-end workflows to service the growing buyside demand. Twenty-three firms facilitated a block and/or EFRP of FX futures or options at CME Group in 2024, with the list including the top tier investment banks as well as non-bank liquidity providers (LPs).
Spot traders, don’t go changing
Capital and operational efficiencies aside, the FX futures central limit orderbook at CME Group has grown to be significant enough even purely from a liquidity standpoint. Amidst a highly fragmented and complex FX market, traders value the additional liquidity that is available in a centralized, transparent all-to-all marketplace of futures, but may not want to trade outright dates or have the necessary infrastructure to book and risk-manage futures.
To cater to this demand, and taking another leap towards building liquidity bridges, CME Group launched FX Spot+ on April 13, 2025, a new all-to-all spot FX marketplace that translates futures liquidity into spot terms and vice versa, expanding liquidity access to OTC traders and bringing the two markets together like never before. A spot trader can continue to trade the Betty, the Loonie or the Bill and Ben, book and settle transactions in spot FX (with a central FX spot counterpart), while seamlessly interacting with the liquidity implied from and to our FX futures. This is made possible through using the live tradeable basis risk from the FX Link orderbook, with implication happening both ways in the background. By building a unique, global network of market participants, connecting the vast trading communities of EBS spot platforms and FX futures marketplace built over the years, FX Spot+ is set to unlock the real value of bringing the FX market together.
*References
The Brilliant World of FX – A primer – Deutsche bank https://www.dbresearch.com/PROD/RPS_ENPROD/PROD0000000000542285/The_Brilliant_World_of_FX_-_A_Primer.PDF &realload=fTYB2BN4sXhafIy/9poFBQclemyQSA6Q~dYUazrwzvUFEkXJ NTYQYt3C/N6sBLnb
FX traders, the future belongs to you!
Rahul Gupta, Senior Director, FX Products at CME Group explores the growing significance of FX futures, now a foundational market for price discovery and risk transfer.
The FX Futures market has often intrigued the traditional OTC trader, viewed as a parallel marketplace with independent market interest and risk, fascinating enough for most to keep an eye on, but leaving many not entirely sure of how to participate in it. The last few years have, however, seen a wave of change coming through. Growing adoption from buy-side and sell-side firms alike has helped to further position the FX futures marketplace to be foundational for market price discovery and risk transfer. A number of recent FX liquidity and market structure reports from leading bank participants and financial institutions discuss the now established presence of Futures liquidity as part of the overall infrastructure used for price discovery, distribution and hedging of market risk.*
Listed FX trading volumes, albeit a part of the huge $7.5 trillion a day global FX market, have seen multi-year growth in recent times. CME Group’s FX Futures and Options average daily volume of ~$96 billion in H1 2025, and an all-time highest single day volume of $314 billion reached in 2024, exceeds many OTC FX venues today. Aside from the headline volume growth, what lends greater significance to its Futures marketplace is the diversity of participation and the underlying transparency of trading amidst a highly fragmented FX market. Futures trading is active in a broad set of over 50 currency pairs including majors and emerging market pairs, and among a comprehensive client base of hedge funds, asset managers, corporate, banks, proprietary trading firms, retail brokers and commodity trading advisors (CTAs) – making the futures ecosystem more complete than ever. When trading in a central limit orderbook, liquidity begets liquidity, and the compound effect of greater client participation has resulted in futures proving to be a reliable liquidity pool for traders through varying market conditions, highly complementing the capabilities of the OTC markets to provide traders with trusted, deep liquidity as and when its needed**.
What’s driven the growth of FX futures?
FX futures transactions are centrally cleared, mitigating counterparty credit risk, without requiring market participants to use bilateral credit lines or ISDA documentation. Since the implementation of SACCR (standardized approach to counterparty credit risk) in the calculation of risk-weighted assets, some market participants have had to cope with increases in capital requirements for trading FX derivatives, especially with FX forwards, swaps and options. However, firms trading in cleared FX derivatives instead can free up their bilateral credit lines, and expect to reduce their capital footprint, resulting in lower costs and arguably better pricing.
Further, transparent and centralized margining of positions allows for efficiencies that relieve cost pressures that have risen due to Uncleared Margin Rules (UMR) for buyside firms and for Banks who service them. Centrally cleared FX futures and options at CME Group are provided with margin offsets between currencies, tenors (i.e Sep vs Dec in the same currency pair) and other cleared instruments like U.S. Treasury and SOFR futures traded at the Exchange. For the deposit of initial margin, market participants can choose from a wide range of currencies and non cash securities including government bonds, treasuries, letters of credit, gold and certain corporate bonds. Variation margin, in quote currency of the pair, is typically in USD to make it more efficient from a funding and processing perspective for customers and FCMs.
Need for standardization and transparency
The OTC FX market provides a great deal of flexibility, with bilateral trading facilitating transactions in a plethora of currency pairs, with settlement dates priced out to multiple years, and a range of products supported including spot, outright forwards, swaps, options and complex derivative structures. With a market so vast and complex, a degree of standardization is much needed for achieving transparency and operational efficiency. The Spot market achieves this to a certain extent, and has been increasingly well complemented by the growing Futures marketplace for derivatives trading. FX futures contracts are structured and standardized – typically trading to fixed monthly and quarterly (IMM) settlement dates. Trading in standardized contracts has allowed for liquidity to concentrate and build up in fixed tenors (often IMM dated), ultimately leading to increased efficiency for market participants. Using futures liquidity, market participants can either trade the outrights directly, or trade the calendar spreads between two listed dates (September versus December for example).
The proliferation of OTC FX venues and distribution of electronic pricing in modern times has also led to an increased need for establishing a market standard that is transparent and reliable. FX futures and listed options central limit orderbooks (CLOBs) facilitate anonymous order to order matching, with no concept of last look or order rejects, making the liquidity interaction simpler and transparent. They allow for any market participant to place resting orders, and in doing so trade passively (earn the bid-offer spread cost), or aggress and consume firm liquidity, effectively creating a cleaner and transparent mode of risk transfer.
Breaking barriers to entry: bringing the FX market together
FX futures enable segregation of credit from liquidity interaction, allows for equal, all-to-all order-based trading on its central limit orderbook (CLOB), and provides market data and information that is accessible to everyone. The large network of Futures clearing members (FCMs) supporting access and a global footprint of client coverage at CME Group has led to new entrants to the FX futures marketplace incrementally over the last few years. The ecosystem has grown by leaps and bounds to include global and regional banks, hedge funds, asset managers, corporate and retail accounts, to a total of ~1,100 global entities having traded its FX futures and options in 2024.
FX futures contracts at CME Group are designed to be as fungible to OTC as possible, with most of the contracts requiring physical delivery in line with the OTC market and leveraging the main cycle of CLS (where applicable), and others are cash settled to market standard benchmarks. This means that on settlement of a deliverable futures contract like EURUSD for example, Euros and US dollars are paid and received on T+2 basis in line with OTC standards. For a non-deliverable currency like Brazilian Real (BRL), the futures contract on settlement is cash settled in US dollars based on the BRL PTAX rate provided by the central bank of Brazil, in line with OTC convention.
The development and growth of unique tools like FX Link (tradeable spot to futures basis) has further bridged the liquidity between futures and OTC markets, enabling traders to manage risk interchangeably and seamlessly. FX Link services multiple use-cases, one of which is enabling market participants to move their OTC Spot risk to cleared futures (to achieve margin and capital efficiencies), and vice versa, effectively operating a ‘live’ Spot-to-Futures basis marketplace. It is increasingly seen as a complementary source of OTC FX swap liquidity with firm, transparent pricing that is tradeable through a credit-agnostic, anonymous, all-to-all marketplace.
Serving the established demand for bilateral trading in the FX marketplace, and facilitating greater flexibility of trading, there has been an increased adoption for Blocks and EFRPs (Exchange for related position) as well. Positions in outright futures, calendar spreads and options can be established through the mechanism of Blocks and EFRPs too, complementing the otherwise execution via central limit orderbooks. Through Blocks, clients can privately negotiate and trade cleared FX futures and options with chosen counterparties (liquidity providers) for listed contracts at a risk-transfer price. With the EFRP route, market participants can establish FX positions through traditional OTC workflows or already hold an existing OTC risk, and then move those to central clearing. A greater number of market-making banks seem to have overcome the operational challenges of adapting to the newer technologies and processes here, and invested in integrating end-to-end workflows to service the growing buyside demand. Twenty-three firms facilitated a block and/or EFRP of FX futures or options at CME Group in 2024, with the list including the top tier investment banks as well as non-bank liquidity providers (LPs).
Spot traders, don’t go changing
Capital and operational efficiencies aside, the FX futures central limit orderbook at CME Group has grown to be significant enough even purely from a liquidity standpoint. Amidst a highly fragmented and complex FX market, traders value the additional liquidity that is available in a centralized, transparent all-to-all marketplace of futures, but may not want to trade outright dates or have the necessary infrastructure to book and risk-manage futures.
To cater to this demand, and taking another leap towards building liquidity bridges, CME Group launched FX Spot+ on April 13, 2025, a new all-to-all spot FX marketplace that translates futures liquidity into spot terms and vice versa, expanding liquidity access to OTC traders and bringing the two markets together like never before. A spot trader can continue to trade the Betty, the Loonie or the Bill and Ben, book and settle transactions in spot FX (with a central FX spot counterpart), while seamlessly interacting with the liquidity implied from and to our FX futures. This is made possible through using the live tradeable basis risk from the FX Link orderbook, with implication happening both ways in the background. By building a unique, global network of market participants, connecting the vast trading communities of EBS spot platforms and FX futures marketplace built over the years, FX Spot+ is set to unlock the real value of bringing the FX market together.
*References
The Brilliant World of FX – A primer – Deutsche bank
https://www.dbresearch.com/PROD/RPS_ENPROD/PROD0000000000542285/The_Brilliant_World_of_FX_-_A_Primer.PDF &realload=fTYB2BN4sXhafIy/9poFBQclemyQSA6Q~dYUazrwzvUFEkXJ NTYQYt3C/N6sBLnb
The foreign exchange market – BIS https://www.bis.org/publ/work1094.htm
FX Markets and FX interventions – BIS https://www.bis.org/publ/mc_240314.pdf
eFX ‘Explainers’ – FX venues – HSBC https://www.gbm.hsbc.com/en-gb/insights/market-and-regulatory-
insights/efx-explainers ** https://www.cmegroup.com/articles/2025/fx-traders-lovers-of-the-light.html