Digital Vega and CME Group have announced the launch of a new FX options block trading service, currently available for client testing.
The leading FX Options e-trading platform joined forces with CME Group to allow buy-side firms to use existing OTC workflows on its multi-bank platform Medusa to request quotes and trade blocks of FX options on futures.
The model offered by Digital Vega and CME Group can be significantly more margin efficient versus traditional OTC options for those subject to Uncleared Margin Rules.
Market participants will leverage Digital Vega’s connectivity, GUI, and workflow technology to request prices in CME Group’s centrally cleared FX options from multiple Liquidity Providers in competition.
“Pricing and execution is in a format familiar to OTC traders”
Chris Povey, Executive Director and Head of FX Options, CME Group, said: “Enabling customers to negotiate and trade risk-transfer blocks via Digital Vega’s Medusa platform is an exciting development in the electronification of the FX options market. This partnership lowers the barriers to entry for buy-side clients looking to gain the margin and operational benefits of our centrally cleared FX options by allowing them to use existing OTC workflows and lean on OTC relationships. In addition, clients could gain access to new liquidity given there is no requirement for bilateral credit relationships.”
Mark Suter, Executive Chairman and Co-Founder, Digital Vega, commented: “Trading CME Group’s FX blocks on Digital Vega’s multi-dealer platform, provides a seamless execution solution to both buy-side and sell-side participants. Pricing and execution is in a format familiar to OTC traders, with deep liquidity provided by a broad group of market makers, and booking to a single central counterparty. This mitigates counterparty credit risk and generates potentially significant capital, margin, and operational efficiencies. Transaction reporting to CME ClearPort is automated and immediate, with detailed post-trade reporting and analytics available.”
“Our new service provides liquidity access for more clients and market makers to trade with each other without having to establish new bilateral credit agreements, which we expect will result in increased liquidity for the market as a whole. We are encouraging clients to onboard to this service now so that they can fully test the system before they begin trading.”
