CME Group Stakes Out Ground In Emerging-Market Currencies
April 11 2011 - 6:36PM
Dow Jones News
CME Group Inc. (CME) is promoting the soundness of futures
markets to build on growth in contracts linked to the Brazilian and
Russian currencies, according to a senior executive with the
exchange company.
The Chicago-based exchange group also is sounding out users of
its renminbi-linked futures to ensure that the contracts meet
customer needs, according to Roger Rutherford, head of global forex
at the Chicago-based exchange operator.
Currency investors are gravitating toward listed futures and
options to trade emerging-markets currencies. Exchange-trading is
seen as a means to mitigate settlement risk in settling cash
trades.
"That's an industry debate that we're picking up on today,"
Rutherford said Monday on a media call.
Futures linked to the Russian ruble and Brazilian real are the
fastest growing in CME's suite of currency contracts, which last
year outpaced its higher-profile agricultural futures complex in
terms of total trading activity. While contracts on the yen, euro
and U.S. dollar are mainstays of the market, Rutherford said that
more investors are looking to trade "higher-yield currencies" of
the so-called BRIC nations--Brazil, India, Russia and China.
Cash transactions in the $4 trillion-per-day foreign-exchange
market, which take place mostly on the interbank market or on
electronic trading platforms, are settled by London-based CLS Bank.
Settlement is seen as the biggest transactional risk in forex
trading, because deals involve the exchange of currencies in
full.
CLS currently settles transactions in 17 major currencies,
representing more than 75% of the daily value of interbank trading.
But CLS doesn't accommodate real-time settlement for dealing in
currencies like the ruble or the real, providing an opening for
CME's regulated futures market.
"People are asking themselves, 'if I'm hedging my currency risk
or other trading risk that involves the ruble, or possibly
speculating in that currency, do I need to take that physical
delivery of rubles?'" said Rutherford, a former CLS executive. "Why
not just take the futures?"
The migration has lifted the level of outstanding trades in
ruble-linked contracts nearly as high as that of CME's Swiss franc
futures market, he said.
CME's Clearport service, which lets traders convert off-exchange
transactions into futures contracts, also has gained momentum from
currency investors using the service to carry out large-scale
trades in emerging market currencies, said Derek Sammann, CME's
managing director of forex and interest rate products.
The company on Monday held a "market exercise" centered on its
five-year-old renminbi futures market to ensure the contracts are
relevant to banks, hedge funds and trading firms. Growing trade in
the renminbi futures is "a focus" for CME as it seeks to bring more
customers into growth currencies, Rutherford said.
-By Jacob Bunge, Dow Jones Newswires; 312-750-4117;
jacob.bunge@dowjones.com
--Katy Burne contributed to this article.
CME (NASDAQ:CME)
Historical Stock Chart
From Aug 2024 to Sep 2024
CME (NASDAQ:CME)
Historical Stock Chart
From Sep 2023 to Sep 2024