Trading FX On Exchanges: Reaching new peaks of trading activity

First Published: e-Forex Magazine 95 / FX on Exchanges / March 2020

Digital version here.

Globally, market volatility and regulatory pressure are causing new customers to look at the hedging products exchanges have to offer them. At the same time, better connectivity and improved and refined technology tools are continually aligning exchange offerings with those familiar to OTC market participants. These themes characterise recent developments at the exchanges we spoke to from Europe, Asia, Middle East, Africa and Latin America. While each has its own specialist offerings and geographical advantages, all are continually bringing new products and services to market and seeking to encourage wider market participation as on-exchange FX moves to the next level.


Paul Houston

“Over the period December 2019 – March 2020, we have seen our FX complex reach all-time records across open interest single day volume and large open interest holders with asset managers now representing 49% of our open interest in EURUSD FX futures.”


In February, CME’s 24 currency pair listed FX options suite averaged USD8.2 billion per day. “Over the past 12 months, we have made a number of enhancements to our FX options aligning them more closely to the OTC market,” explains Paul Houston, CME Group’s Head of FX Products. “Our options are now all European style, with auto-exercise, and we are using the 10am New York cut for expiries. We have reduced strike increments to 25 pips, included Monday expiries alongside the existing Wednesdays and Fridays, and are working to extend the offering to additional currency pairs.”

On the futures side, CME continues to work on optimising its 40+ currency pairs of FX futures, in terms of cost and trading. “We’ve continued to invest in our FX Link service, as this provides another mechanism for entering the listed FX futures marketplace,” Houston continues. “FX Link is a tradeable spread between the OTC spot FX and listed FX futures markets, allowing users to simultaneously buy/sell FX futures vs sell/buy OTC spot.

“Over the period December 2019 – March 2020, we have seen our FX complex reach all-time records across open interest single day volume and large open interest holders with asset managers now representing 49% of our open interest in EURUSD FX futures. This provides a very strong indication of genuine growth in the adoption of FX futures as a mechanism for managing FX risk.”

Looking ahead to the rest of 2020, CME is working on a number of key initiatives across its FX complex including its core G7 FX futures, FX options, emerging market futures, and use of our products as a proxy for FX swaps.

“The first half of the year is focussed on delivering two further minimum price increment reductions (for CAD & AUD) in order to deliver cost efficiencies ahead of the March calendar roll, adding Monday expiries alongside the existing Wednesday and Fridays in our FX Options complex as well as extending the offering to additional currency pairs. For the second half of the year,” Houston concludes, “we will continue to work with our clients to understand which further enhancements and additions we need to make in order to help deliver further capital, margin and operational efficiencies to the FX marketplace.” He encourages clients to keep engaging with the exchange directly with requests or feedback as to how it can help them optimise their FX activity.


Joshua Hurley

“Clients have to take strategic decisions on how to mitigate the impact of regulations and listed FX is a ready-made solution that is relatively simple to implement.”


The Deutsche Borse owned exchange offers FX derivatives on 12 currency pairs: EUR/USD, EUR/GBP, EUR/CHF, USD/CHF, GBP/CHF, GBP/USD, EUR/AUD, EUR/JPY, USD/JPY, AUD/USD, AUD/JPY and NZD/USD.

Demand for these are products is being driven by some big themes according to Joshua Hurley, Eurex head of FX ETD Sales and Business Development. “Regulation is a key driver,” he says, “most notably uncleared margin rules are pushing clients near the uncleared thresholds. Affected clients have to take strategic decisions on how to mitigate the impact of these regulations and listed FX is a ready-made solution that is relatively simple to implement. Even unaffected counterparties are taking this opportunity to review their existing FX trading arrangements and add listed FX to gain greater flexibility in terms of execution and counterparty management.”

Hurley explains that with pressure from counterparties to minimize the impact of their trading footprints on bank balance sheets, and bank prime brokerage a constantly shifting environment, big clients are looking to listed FX to minimize counterparty impact and their counterparty risk. “Asset Managers that trade in the name of segregated funds can ensure that all funds receive the same transparent execution and the physical delivery is managed by an EFP. Hedge funds and algorithmic traders can rely on a deterministic quote history and prefer the futures for that reason.”

Having launched FX futures in 2019, Eurex has seen marked increase in volumes through Q4 2019 and into 2020. “Our offer of deliverable FX products and an innovative rolling spot contract, with good pricing in all time zones, plus our off-book liquidity providers are supplementing this on-screen liquidity, it’s a safe route to take. Rolling spot offers the OTC FX market an alternative to the current available liquidity pools.”

Eurex has designed its products to be familiar to OTC audiences. Among the ways it has done this is by partnering with 360T. “This is a joint DB1FX offering to enable clients to receive electronic OTC futures liquidity. We believe this helps clients make the transition from OTC trading into futures as an underlying product.”
In summer this year DB1FX plan’s to complement its futures products with listed options.


Igor Marich

“MOEX is planning to acquire an FX trading platform, NTPro, with ADTV of approximately USD 4 billion across multiple currency pairs. This acquisition will allow MOEX to offer its domestic and international clients a full range of traditional on-exchange and modern OTC FX trading solutions.”

Moscow Exchange

Spot FX turnover on MOEX doubled in March from December 2019. Average daily trading volume (ADTV) on MOEX’s FX spot market is now USD 8.3 billion. International clients and Russian individual clients are the most active growth groups on MOEX, accounting for 42% and 9% of turnover, respectively. ADTV in FX futures in March was USD 5.2 billion, an increase of 57.6% year-on-year, notional ADTV in FX options is USD 200 million.

Igor Marich, Member of the Executive Board at MOEX, said: “Delivering a quote feed from major international liquidity providers has helped MOEX to strengthen its appeal. MOEX has successfully launched new products to better match liquidity providers and takers. We have also created new speed-bump order books for spot FX trading in large amounts and new RFS instruments in spot FX and derivatives for trading even larger amounts.”

Innovation has been a big focus for MOEX this year. The Exchange is considering launching the new FIFO FIX Gateway technology on the FX market, which will improve system predictability and ease of use while reducing latency and jitter for MOEX co-location clients. This will improve market efficiency.

MOEX offers a uniquely diversified platform where spot FX and swaps, all types of derivatives, money market, equities and bonds are traded within a single CCP clearing infrastructure. The Exchange continues to promote the benefits of access to its FX Market internationally through the development of its Remote Clearing Memberships coupled with a Unified Collateral Pool option, thus providing cross-margining efficiencies alongside feature-rich net settlement post-trade facilities.

These are especially important for international clients, given that MOEX has the dominant liquidity pools for deliverable spot FX and cash settled FX derivatives trading. MOEX’s local FX market has become global by attracting trading participants from over 125 countries and became the recognised international benchmark for all RUB instruments traded around the world.

“As part of our efforts to enhance MOEX’s matching facilities and promote its FX benchmarks, last year the Exchange launched the Weighted Average USD/RUB 11:30 Matching Service in which the FX rate is the Bank of Russia’s official rate. We have also extended the time for submitting orders in the instrument and MOEX USD/RUB 12:30 FX Fixing. In 2019, the fixing turnover increased by 1.5 times. On 17 December 2019, the MOEX fixing achieved a record high turnover of USD 369 million,” says Marich.

“In line with other exchanges, which have added OTC e-FX platforms to their business, MOEX as part of its longer-term strategy is seeking to enter the OTC FX spot market segment, which is adjacent to its existing CLOB business. MOEX is planning to acquire an FX trading platform, NTPro, with ADTV of approximately USD 4 billion across multiple currency pairs. This acquisition will allow MOEX to offer its domestic and international clients a full range of traditional on-exchange and modern OTC FX trading solutions,” says Marich.


Les Male

“2019 was our most successful year since inception.”


“2019 was our most successful year since inception,” says Dubai Gold and Commodities Exchange (DGCX) CEO Les Male. “Trading across the DGCX’s G6 currency pairs has been strong this year. The products recorded overall year-to-date volume growth of 526% compared to the same period last year. The EUR/USD contract was the most prominent, trading 130,881 contracts, up 41% M-O-M in February and 541% Y-T-D. We have also recently revised the product specification of our offshore Chinese Yuan Futures contract in line with member demand. We are now beginning to see the early signs that this was the right decision to make with a number of new members and participants attracted to the DGCX because of the opportunities that have arisen from the contract.”

DGCX has recently implemented a member-led approach to product development. “With this in mind, the rest of 2020 promises to be particularly busy for us in the FX space,” says Male,  “as we prepare to launch new products in response to member demand. Subject to regulatory approval, we have plans to launch a number of new and innovative currency products, including FX Rolling contracts, which are expected to be particularly beneficial to our institutional investors.”

Meanwhile its drive to encourage greater participation has received a boost from the recent appointment of a head of outreach and engagement. The aim is to promote and educate people across the wider GCC region. The Exchange’s promotion activities have included conferences, forums and other events, this appointment will enhance those efforts. Les Male concludes that geopolitics and global events are causing high levels of volatility across markets. “This will ultimately lead to higher volumes across numerous asset classes, including currencies, equities, metals and hydrocarbons, all of which are traded on the DGCX.”


Elaine Mabiletsa

“We migrated our currency derivatives market onto the MIT trading platform in April 2019 and now offer real time clearing through the Cinnober clearing system and make available historical tick data via the Data Mine platform.”


Currency derivatives have been traded on the Johannesburg Stock Exchange (JSE) since 2007. They track the ZAR versus USD, EUR, GBP, AUD, JPY, RMB, CHF, BWP (Botswana pula) NZD and CAD. In recent years new products have been added to track a basket of currencies and contracts that allow for the selection of a preferred expiry dates. In 2019, the total volume traded was over 69million contracts and average daily traded volume is around ZAR4billion.

“We have 6 product suites,” explains Elaine Mabiletsa, JSE’s Manager Currency Derivatives. “These include futures, options and quanto futures, anyday futures and anyday options.  We also have the ability to list an exotic option on demand. These include cash settled single barrier knock-in/out options; cash settled strike-resetting options (maximum of five reset events allowed) and out of currency settled options on certain currency pairs.”

JSE continues to upgrade both its technology platforms and its data offerings. “We migrated our currency derivatives market onto the MIT trading platform in April 2019,” says Ms. Mabiletsa. “We now offer real time clearing through the Cinnober clearing system and make available historical tick data via the Data Mine platform.”

Education around currency derivatives is an on-going programme for Mabiletsa and her team. This includes presenting at trade shows and local exhibitions at home and abroad. This year she says that there will be roadshows in Cape Town, Durban and Johannesburg.  They will also appear at BOCA, LeaderEX, NAMPO, JSE SheInvests, TradeTech Europe and FIA Chicago Options & Futures Expo.

As the continent’s largest FX derivatives exchange with more stable and advanced infrastructure than its African peers, JSE looks well set to gain from the increased interest in African FX.


Mario Palhares

“Privatisation plans have been announced that can attract international investors and may bring positive effects directly to the local FX market.”


In December 2016 the Bank for International Settlements had this to say in its BIS Quarterly Review: “Owing to its depth and high level of development, the Brazilian derivatives market has been innovative and resilient to financial distress, during many episodes of financial turbulence… The Brazilian derivatives market arguably helped prevent more serious financial distress or a credit crunch. It did so by providing low-cost, transparent and liquid trading vehicles for a wide range of customers.”

Mario Palhares, Brasil Bolsa Balcão S.A.’s (B3) Listed Products Director says
that B3 has a complete FX portfolio which includes FX Futures Contracts, Options, Forward USD Rate Contracts (FRC) and DI Rate x U.S. Dollar Spread Contract (DDI). The U.S. Dollar Futures Contract is one of the most traded financial derivatives listed on B3. Standard and Mini U.S. Dollar Future Contracts are in Top10 FIA Global Ranking, 2019 in FX Instruments.
Aiming to develop the market and delivering more efficient ways to the FX strategies, B3 has recently added new products: 16 FX Futures Contracts (Currencies against USD) to generate efficiency once all players are used to build their portfolios against USD.
Additionally, B3 launched Mini U.S. Dollar Options (weekly and monthly expiration) the instrument allows negotiation with shorter maturities, bringing flexibility and precision to the market. Moreover, the mini options were designed to allow the participation of individuals in this market.

“Since last year,” says Mr. Palhares, “Brazil has been undergoing structural reforms, the interest rate is at the lowest historical level. More recently, a reform package has been approved, also there are privatisation plans that can attract international investors and may bring positive effects directly to the local FX market. B3 continues to upgrade its technology platform. It has consolidated its data center and implemented a new pre-trade risk tool called Line 5, to improve risk controls and increase speed of response. B3 has also recently launched new data products named UP2DATA, UP2DATA ON DEMAND and DATAWISE which  offer the following services: reference data for all listed and OTC derivatives,  on-line store of historical data and  analytics tools that enables market participants to better understand their trading behaviours. Mr. Palhares points out how important education is for B3 in reaching new and existing customers. “Education, for B3, is a path for the continuous development of the capital markets. This work is done by B3 Education and its activities are guided by three main drivers:

  • Boost knowledge about our products and services and support our customers in their strategies.
  • Disseminate knowledge among market professionals and other interested parts through training programs.
  • Establish partnerships that contribute to improving the training of financial market professionals and promote knowledge for the society in general

This content is now available on B3’s website, but we are working on an educational platform in which we will offer courses from B3, our clients and other partners. We intend to launch this platform in April.”


Indian regulator SEBI has recently sanctioned the launch of Currency Futures and Options Contracts on IFSC Exchanges. Commenting on this approval, India INX MD & CEO – V Balasubramaniam said, “We welcome the SEBI move to allow IFSC Exchanges to launch the Currency Futures and Options Contracts involving Indian Rupee. India INX is delighted and very excited about this development and is fully geared up to launch the same. We will be submitting our detailed product specifications to SEBI for approval on the INR-USD Futures and Options contracts on India INX which will be cash settled in US Dollars and cleared by India ICC our Clearing Corporation which shall act as Central Counterparty to these trades and offer settlement guarantee.”


K.C. Lam

“Because of the scale of our liquidity, SGX remains the primary venue that most people look at for trading CNH and RMB.”


Growth in trading FX products on the Singapore Exchange (SGX) continued its ever-upward march in 2019. “Because of the scale of our liquidity, SGX remains the primary venue that most people look at for trading RMB,” says K.C.Lam, Head of FX and Rates, SGX. SGX reported the following big numbers for the year:

  • Aggregate FX volume at US$1.3 trillion in 2019, up 44% from US$914 billion in 2018
  • Trading volume at 23.5 million contracts in 2019, up 28% from 18.4 million in 2018
  • Year-end aggregate open interest at US$7.89 billion, up 90% y-o-y
  • For December, volume exceeded US$114 billion, with over 2 million contracts traded

The New Year has started strongly. The average daily volume in January of its headline USD/CNH futures contracts increased to USD4.21 billion. Its INR/USD futures trading volume for the month totalled USD 41 billion, 29% up year-on-year.

SGX is set to introduce a new TWD futures contract. These will be full sized contracts compared to the existing mini USD/TWD offering, resulting from customer demand, according to K.C. Lam.

“Our market feedback suggests that we have participants, especially those who are not currently trading futures but wanting to trade them, asking for a bigger size contract. On the back of Uncleared Margin Rules, real money customers have come to us and said, “We really need your help. If you can design something bigger, we can trade in bigger clips, and combine that with FlexC FX features, it would help us if we have a bigger contract similar to what we get in the OTC world.”
At the same time SGX’s investment in BidFX, a specialised trading platform for global FX markets, is enabling customers who are used to trading OTC FX to access multiple pools of FX liquidity. Customers now have the option to have bilateral counterparty and/or centrally cleared FX exposures, all in one platform.  Added to SGX’s continued education and engagement efforts, K.C. Lam concludes, “All this is part of the things that we’re doing to encourage people to look at trading FX futures on SGX, understanding the impending cost implications and their options. All very relevant as the UMR looms.”


Jeffrey Britell

“Market participants and exchanges are in an arms race to adopt the next generation speed of data dissemination and execution”


The essential key to the growth of electronic FX markets and platforms in general and to on-exchange trading in particular, is connectivity.“We’re seeing new regions and new players catching up with the more developed markets”, says Jeffrey Britell, Senior Vice President, Global Network Services at IPC, a technology provider that offers cloud-based connections to exchanges and other liquidity venues. Emerging markets are leapfrogging some of the more well-entrenched players in developed markets and using technology to do that while improving their institutional capacity and accumulating enhanced physical and human capital.

They’re able to establish themselves and get to market quickly. “For example, look at any of the crypto exchanges. They went from zero to dozens in a short space of time, say a year, two years. We see similar trends in equities. Look at MEMX, the Members Exchange in the United States, which just came up. They were able to launch in a period of six to nine months. It was probably slower from the regulatory perspective than it was from the technological one. Long Term Stock Exchange and MIAX PEARL Equities Exchange are other examples.”

Britell points to the Shanghai Futures Exchange and around China in general. He outlines the increased demand for connectivity across Asia such as in Malaysia, the Philippines, and the Ho Chi Minh City Stock Exchange and Hanoi Stock Exchange in Vietnam. Singapore is a leading player in FX due to expansion of matching engines now located in Singapore and Monetary Authority of Singapore promoting economic growth. Where exchanges go live, on-exchange FX trading is likely to follow. He also sees growth in Eastern Europe and in Latin America. New exchanges come with regulation as a pre-requisite, encouraging greater transparency, market stability and trust. A significant consideration is the location of data centres for markets and their participants. Britell notes that generally the trend is for datacentres to situate themselves as close to the city centre as possible. “However, the NY2, NY4, and NY5 datacentres are out in Secaucus, New Jersey. A similar situation exists in London, where Slough isn’t in the city centre, but if you look at Tokyo it is. Meanwhile traders, especially those at hedge funds and high frequency shops are seeking lower and lower latency.

Market participants and exchanges are in an arms race to adopt the next generation speed of data dissemination and execution,” Britell adds. He concludes by saying the trick is teaming up with the most suitable technology partner. “Be smart about how you pick your partners and who you’re looking to connect with, to make sure that you’ve got the most appropriate route to market depending upon where you’re based and the product that you trade.”


This roundup of developments in on-exchange FX points clearly to greater convergence between exchange and OTC trading. Spot OTC remains dominant by some margin and any suggestion that all FX trading will one-day be conducted on-exchange still seems fanciful. However, what we are witnessing is the steady emergence of a range to FX trading and hedging choices open to real money and speculative market participants alike.

This growing diversity can only be beneficial in the long time in providing the products and services that meet the needs of an ever-growing and more diverse global FX market.