CME Archives - The Industry Spread

CFTC Staff Issues Clearinghouse Supervisory Stress Test Report

May 7, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: assessment powers, CFTC, CFTC Staff, clearinghouse, CME, LCH, market shocks, OCE, Stress Test Report

Washington, DC — The Commodity Futures Trading Commission’s (CFTC) Division of Clearing and Risk (DCR) and the Office of the Chief Economist (OCE) today issued Stress Test Report, CCP Supervisory Stress Tests: Reverse Stress Test and Liquidation Stress Test, a two-part report that includes the results of a reverse stress test of central counterparties (CCPs) or clearinghouses resources and an analysis of stressed liquidation costs. This is the third in a series of supervisory stress testing exercises and resulting reports on CCPs that CFTC staff has conducted. Previous stress testing reports were issued in 2016 and 2017.

Reverse Stress Test

The reverse stress test analysis included futures and options at CME Clearing and interest rate swaps at LCH Ltd. Both house accounts and customer accounts of all clearing members (CMs) were analyzed, using actual positions as of September 5, 2018.

The purpose of the exercise was to identify combinations of market shocks and CM defaults which would consume pre-funded resources, which include defaulting CMs’ initial margin, CCP committed capital, and guaranty fund. Market shocks were based on four extreme historical dates, as well as scenarios that represent two and five times the moves on these dates.

The results of the reverse stress test indicate that the two tested CCPs would have sufficient pre-funded resources to cover losses even if all CMs with losses defaulted under certain extreme historic 1-day scenarios.

One scenario includes market shocks five times the size of those experienced on the day following the Lehman Brothers bankruptcy announcement; this scenario included, for example, price moves as large as 225 bps in swap rates, and 25 percent in stock index futures. These moves likely exceed possible market risk at the CCPs, and thus may be considered implausible. Under this market scenario, only two firms experienced stress losses greater than initial margin at both CCPs concurrently. If both firms defaulted, the combined shortfall would have been slightly greater than pre-funded resources at both CCPs. As the analysis did not include assessment powers, the CCPs would have access to additional resources not considered in the exercise.

Liquidation Analysis

The analysis of liquidation margin add-ons included interest rate swaps at both CME Clearing and LCH Ltd. Only the 10 house accounts with the largest liquidation margin add-ons as of June 30, 2018 were included.

The purpose of the exercise was to test whether there would have been sufficient pre-funded resources available if the actual costs of hedging and auctioning the portfolio of a defaulting member exceeded CCP estimates. The analysis was not a test of liquidation margin adequacy.

Results suggest pre-funded resources would have been sufficient to cover extreme but plausible market losses plus liquidation expenses for two house accounts even if the actual liquidation costs were double the amount of the liquidation margin add-on. This analysis, like the reverse stress exercise, did not include assessment powers.

CME Group’s Traiana Enhances Credit Risk Hub for FX Prime Brokers

May 2, 2019 by Ricardo Esteves Leave a Comment Filed Under: Industry News Tagged: BrokerTec, CME, CME group, EBS Market platform, FXPB, lifecycle management, NEX, risk control, trade life cycle, Traiana, TriOptima

Traiana has made significant enhancements to its Credit Risk Hub in order to allow FX prime brokers to define trade information in more detail to increase credit risk controls and reduce the risks of credit over-allocation.

The leading infrastructure service for trade life-cycle and risk management solutions offers its Credit Risk Hub for a dual purpose: Designation Notice Manager and Credit Link. The former helps FX prime brokers establish, monitor, amend and terminate FX Tri-Party Agreements with buy-side clients if they default on a trade. The latter is a calculation engine which provides FX prime brokers with end-to-end control of how much credit is extended to buy-side clients.

The enhancements to the Credit Risk Hub beginning this May will include the ability to define which eligible FX instruments, currency pairs and tenors buy-side managers can trade as part of Tri-Party Agreements, which in turn impacts the level of credit extended to them. CreditLink can monitor the additional trade detail in order to provide greater control to prevent overallocation of risk to clients.

Andres Choussy, Chief Executive Officer of Traiana, commented: “The enhancements to our Credit Risk Hub build on our world leading franchise and allow us to act as a central hub for the calculation, distribution and enforcement of credit lines across prime brokers, executing brokers and their end clients.

Mariam Rafi, Managing Director, Americas Head of OTC Clearing, Citigroup, said: “Citi is focused on giving clients enhanced trading flexibility, while prudently managing our credit exposure. Credit Risk Hub’s new enhancements are a key complement to Citi FX PB’s suite of risk management controls and facilitate increased market access for our clients.”

Leah Mallas, Global Head of FXPB and FX Clearing, J.P. Morgan, added: “Control over credit risk is a key concern for us and our clients. Working with Traiana’s enhanced tools, we are able to provide added controls coupled with increased credit, tenor and product scope. This enables more efficient execution of clients’ trading strategies while also strengthening our risk management as an intermediary.”

Traiana is part of CME Group ever since the acquisition of NEX Group with each NEX share being entitled to 500 pence in cash and 0.0444 shares of CME Group Class A common stock. Run-rate cost synergies are expected to touch $200 million annually by the end of 2021.

The £3.9 billion ($4.96 billion) deal allowed CME Group to operate its individual Markets and Optimisation businesses as sub-brands including BrokerTec, EBS, Traiana and TriOptima.

Traiana Provides Central Clearing Connectivity to HKEX OTC Clear for FX Deliverables

January 30, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: business, Central Clearing Connectivity, CME, FX, FX Deliverables, FX trades, HKEX, HKEX OTC Clear, innovative initiative, investment, lifecycle management, market, trade, Traiana

Traiana, a leading infrastructure service which provides trade life-cycle and risk management solutions, today announced that it has provided direct central clearing connectivity to the Hong Kong Exchanges (HKEXs) and Clearing’s OTC Clearing Hong Kong (OTC Clear).

Market participants can now access HKEXs OTC Clear service to clear USD/CNH and USD/HKD FX forward and swaps, vTraiana, a leading infrastructure service which provides trade life-cycle and risk management solutions, today announced that it has provided direct central clearing connectivity to the Hong Kong Exchanges (HKEXs) and Clearing’s OTC Clearing Hong Kong (OTC Clear).ia Traiana’s Clearing Hub (CCP Connect), which provides affirmation, matching and trade processing capabilities.

HKEXs OTC Clear Deliverable FX service can be used to mitigate settlement risk which arises when payments and receipts of different currencies occur at different intervals during a standard bilateral settlement process. The service can also be used to offset settlement exposure with its clearing house cross currency swaps service.

Member banks are now able to clear deliverable FX trades, irrespective of how they were executed, using one of Traiana’s many connectivity and workflow options. Existing Traiana clients and electronic trading venues can enable the HKEX clearing workflow as an add-on to their existing Traiana FX post-trade processing services.

“We are very happy to be working with Traiana,” said Jacky Mak, Head of OTC and FIC Business Development in HKEX’s Clearing Division. “It enhances our ability to connect with the growing number of market participants interested in HKEX’s broad range of services including RMB-related services.”
“As the number of firms looking to voluntary clear FX instruments continues to rise, central clearing connectivity is becoming more and more important to our client base,” said CME Head of Optimization Asia, Guy Rowcliffe. “Our partnership with HKEX, provides the market with an innovative initiative which can be used to address a number of challenges associated with standard bi-lateral trade lifecycle management.”

Traiana is a part of CME Group.

ICE’s Bakkt Crypto Exchange Platform Inks First Acquisition Agreement, To Buy Certain Asset of Chicago-Based Rosenthal Collins Group

January 15, 2019 by Karthik Subramanian Leave a Comment Filed Under: Industry News Tagged: BAKKT, Blockchain, brokerage, CBOE, CME, Cryptocurrencies, Cryptocurrency exchange, financial institutions, financial services, ICE, investment, regulators, Rosenthal Collins Group

Intercontinental Exchange’s cryptocurrency platform Bakkt has signed the company’s first acquisition agreement. Bakkt CEO Kelly Loeffler made the announcement on her official medium blog. The cryptocurrency startup will buy certain assets of Chicago-based futures commission merchant — Rosenthal Collins Group (RCG).

Rosenthal Collins Group established nearly 100 years ago has also sold its customer business of the futures brokerage to London-headquartered commodities broker Marex Spectron. RCG has recently expanded its client base to 14,000 accounts while deepening its introducer broker network.

Bakkt’s acquisition of RCG’s asset is the latest push towards positioning itself towards more regulated markets. According to Bakkt CEO, the RCG’s system and expertise would improve the company’s risk management and treasury operations. This acquisition is in line with other US cryptocurrency operators including Coinbase which puts them in a firmer regulatory footing with regulators. It further helps the crypto firm to position themselves up to offer a broader range of crypto-based financial products.

Bakkt CEO Kelly Loeffler stated in her blog:

“It will enhance our risk management and treasury operations with systems and expertise. Other aspects of the transaction will contribute to our regulatory, AML/KYC and customer service operations as we help enable digital asset acceptance by bringing more choice and control to buyers and sellers,”

Georgia based ICE last month said that the Bakkt would launch the first physically delivered Bitcoin futures in the last week of January. But now it has been delayed for the third time with no specific date of launch. The initial launch was set for November 2018.

Other established exchange like Cboe and CME offers Bitcoin futures but are cash settled, in which the actual cryptocurrency doesn’t change hands.

Catena’s Reporting Solution Integrated in CME Group’s Trade Repositories

January 11, 2019 by Ricardo Esteves Leave a Comment Filed Under: Company News, Industry News Tagged: Aaron Hallmark, Catena, Catena's Reporting Solution, CME, Fintech, Jonathan Thursby, MiFID II, Randall Duran, regulatory obligations, TRACE, Trade Reporting, trade repositories

CME Group’s North American and European trade repositories have integrated the capabilities of Catena Technologies’ Trace Reporting solution, the fintech company announced.

The business process management (BPM), enterprise integration, and enterprise content management solutions provider has designed TRACE to help financial institutions fulfill global regulatory obligations for derivative trade reporting.

The integration with CME Group‘s trade repositories allows customers in Europe, United States, Canada, and Australia, to benefit from automated G20 trade submission and post-submission reconciliation for customers with global trade reporting requirements.

Randall Duran, Chairman of Catena Technologies, commented:

“We see a major opportunity to help financial firms in North America and Europe fulfill their global regulatory trade reporting obligations and address upcoming reporting changes. Many of these firms have issues with delegated reporting and third-party trade reporting services that have limited capabilities. Working together with CME Group, Catena is able provide a solution that improves customers’ operational workflows and provides an end-to-end solution that addresses the full range of regulatory compliance needs.”

Jonathan Thursby, Head of Global Repository Services at CME Group, said:

“CME Group is pleased to work with Catena in extending their success with customers in APAC and providing comprehensive trade reporting solutions to customers globally. Working together with leaders like Catena to improve the accuracy of trade reporting and reduce operational costs will bring clear benefits to our customers. As a global leader and operator of trade repository licenses, spanning Australia, Canada, European Union and the United States, CME Group can offer a common experience and broad expertise to optimize trade reporting.”

Aaron Hallmark, Chief Executive Officer of Catena Technologies, added:

Aaron Hallmark, Chief Executive Officer of Catena Technologies

“Many firms have implemented tactical solutions for G20 and MiFID II reporting that rely on manual processing, are costly to maintain, and are difficult to manage and monitor. TRACE’s automated reconciliation, in-line data quality controls, and dashboard monitoring capabilities, together with CME Groups’ strong technology and operations, can help customers overcome these challenges.”

TRACE manages the end-to-end reporting and reconciliation workflow by automatically capturing, calculating, enriching, transforming, and submitting the required information to trade repositories. The system also reconciles trade repository data with a firm’s in-house and external data sources.

Catena’s system lowers operational costs through extensive pre-submission data validations and up-front error reporting which minimize costly re-submissions. Its centralised reporting mechanics mean operational economies of scale, and users can query consolidated data on demand, from Excel or from online and mobile devices.

Global Exchanges and Marketplaces Reported Strong Trading Volume across Segments in October 2018

November 5, 2018 by Karthik Subramanian Leave a Comment Filed Under: Industry News Tagged: ADV, average daily volume, CME, Equity Index volume, Global Exchanges, Marketplaces, MOEX, Moscow Exchange, operational metrics, trading volume, turnover

Moscow Exchange (MOEX)

Moscow Exchange has released its October 2018 operational metrics reporting a 10 per cent month-on-month increase in total trading volume across Moscow Exchange’s markets to RUB 78.1 trillion. Segment wise details of trading volume for the month of October 2018.

Equity and Bond Market

Trading in equity and bond market increased by 8.3 per cent in October 2018 to RUB 2,601.3 bn ( RUB 2,401.8 bln Oct. 2017). The turnover in shares, investment fund units and RDRs increased by 55.7 per cent to RUB 1,047.9 bn (Oct. 2017: RUB 673.2 bln) and turnover in corporate, regional and sovereign bonds was RUB 1,553.4 bn (Oct 2017: RUB 1,728.7 bn)

Derivatives Market

Turnover in the Derivatives segment increased by 28.8 per cent to RUB 8.4 trillion (Oct. 2017: RUB 6.5 trillion). Open interest at the end of the month amounted to RUB 503.7 bln (Oct. 2017: RUB 861.0 bln).

FX Market

Total turnover in the FX Market increased by 11.4 per cent to RUB 30.4 trillion (Oct. 2017: RUB 27.3 trillion). Spot trades increased by 13.8 per cent to RUB 7.0 trillion and swap trades and forwards amounted RUB 23.4 trillion.

The average daily volume during the month was RUB 1,323.7 bln compared to RUB 1,242.2 bln in October 2017.

CME Group

CME Group on Friday also reported it October month operational metrics, reporting strong growth in trading contracts. The average daily volume (ADV) has reached 20.6 million contracts in October 2018 which is 38 per cent higher from October 2017.

Its Equity Index volume reached 4.7 million contracts per day, which is 111 per cent from October 2017 levels.

Interest Rate volume averaged 10.6 million contracts per day which is 39 per cent higher from October 2017 figures.

The daily Foreign Exchange volume averaged 903,000 contracts in October 2018, up by 2 per cent on yearly basis but is 4.4 per cent lower from the previous month.

Cboe Global Markets

Cboe Global Markets has achieved numerous feat in October by registering record monthly volumes across segments.

The Cboe Volatility Index (VIX) futures traded at Cboe Futures Exchange registered record monthly volumes of 9.66 million contracts in October 2018, surpassing the previous record of 9.16 million contracts set in August 2017. CFE’s total volume also reached record monthly high of 9.72 million contracts in October2018, breaking previous high of 9.18 million contracts set in February 2018.

The Cboe S&P 500 options reported record monthly volume of 41.40 million contracts in October 2018, surpassing the previous record of 34.64 million contracts set in February this year.

SPX Weeklys options also recorded an average daily volume of 1.12 million contracts. Previous record volume was 1.03 million contracts which was again set in Feb 2018.

CME Group Achieves Asia Pacific Average Daily Volume of 726,000 Contracts in Q3 2018, Up 4 Percent from Q3 2017

October 17, 2018 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: CBOT, CME, CME group, Energy products., marketplace, NYMEX, risk management

LONDON and SINGAPORE, Oct. 15, 2018 /PRNewswire/ — CME Group, the world’s leading and most diverse derivatives marketplace, today announced that it achieved Asia Pacific quarterly average daily volume (ADV) of 726,000 contracts in the third quarter of the year, up 4 percent from the corresponding period last year. This was driven largely by a strong performance in Equity and FX products, up 41 percent and 36 percent respectively.

“In the past few months, heightened geopolitical uncertainty has further highlighted the need for risk management on a robust, liquid and regulated marketplace,” said Christopher Fix, Managing Director and Head of Asia Pacific, CME Group. “We continue to see trading volume growth out of Asia Pacific, as our client education efforts gain further traction in the region.”

Latin America quarterly ADV was 82,000 contracts in the third quarter of the year, up 21 percent from the third quarter in 2017. This was driven by 92 percent growth in Interest Rate products and 27 percent growth in Energy products.

Europe, Middle East and Africa quarterly ADV hit 2.9 million contracts in the third quarter of 2018, down 7 percent from third quarter 2017. The Metals and Agricultural Commodities products saw an increase of 14 percent and 3 percent respectively, compared to the same period last year.

In all, CME Group’s international (defined as outside of North America) ADV reached 3.7 million contracts during the third quarter of 2018, down 5 percent over the same period last year.

Globally, CME Group’s September 2018 ADV reached 17.5 million contracts, up 3 percent from September 2017. Open interest at the end of September was 120 million contracts, up 6 percent from September 2017 and up 11 percent from year-end 2017. CME Group averaged 15.6 million contracts per day in the third quarter of 2018, down 1 percent from third quarter of 2017.

As the world’s leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk. CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. Around the world, CME Group brings buyers and sellers together through its CME Globex® electronic trading platform. CME Group also operates one of the world’s leading central counterparty clearing providers through CME Clearing, which offers clearing and settlement services across asset classes for exchange-traded and over-the-counter derivatives. CME Group products and services ensure that businesses around the world can effectively manage risk and achieve growth.

CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex and E-mini are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are trademarks of Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. Dow Jones, Dow Jones Industrial Average, S&P 500 and S&P are service and/or trademarks of Dow Jones Trademark Holdings LLC, Standard & Poor’s Financial Services LLC and S&P/Dow Jones Indices LLC, as the case may be, and have been licensed for use by Chicago Mercantile Exchange Inc. All other trademarks are the property of their respective owners.

CME Group Reports Record Intra-day Volume of 1,150,475 contracts on Oct. 11, 2018

October 16, 2018 by Karthik Subramanian Leave a Comment Filed Under: Industry News Tagged: CME, CME group, contracts per day, daily volume, futures, manage risk, Nasdaq-100, options, Options and futures, Tim McCourt

Tim McCourt, CME Group Global Head of Equity Index Products and Alternative Investments

Options and futures exchange, CME Group (NASDAQ: CME) has announced that its E-mini Nasdaq 100 futures have reached an all-time daily volume record of 1,150,475 contracts on Thursday, Oct. 11, 2018, breaking the previous record of 1,149,387 contracts reached on Sept. 18, 2008.

In 2018, the Nasdaq-100 futures and options products have traded an average of 446,000 contracts per day, an increase of 59 per cent from 2017 levels. The average daily, weekly and monthly volumes have almost tripled during the last five years to more than 11,000 contracts per day in 2018.

Tim McCourt, CME Group Global Head of Equity Products and Alternative Investments said:

“This milestone demonstrates how global investors are increasingly turning to CME Group’s products to manage risk or take advantage of trading opportunities amid ongoing volatility in the equity markets. Nasdaq-100 futures and options products allow customers to gain exposure to the 100 largest U.S. non-financial companies while benefiting from capital efficiencies by trading alongside our industry-leading equity index products.”

CME Receives Final Clearance from the US DOJ

In another development, CME Group has received the final clearance from the Hart-Scott-Rodino Act from the United States Department of Justice – Antitrust Division, for acquiring London’s NEX Group Plc. (LON: NXG).

Earlier this year, the CME Group has announced acquistion of NEX at a total £3.9 billion (USD $5.4 billion) deal both cash and shares swaps. It has already received regulatory approvals from UK FCA, Germany, Sweden and Italy and has made the requisite pre-notifications in Hong Kong.

With this, CME Group expects to close the acquisition process by end of this year.

CME Group Launches Free Tool to Help Market Users Gauge Futures Market Liquidity Across Time Zones

September 29, 2018 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: CME, CME group, CME Liquidity Tool, Free Tool, Futures Market Liquidity, futures markets, market liquidity

CHICAGO, Sept. 25, 2018 /PRNewswire/ — A powerful new tool to measure futures market liquidity is now available to CME Group market users around the globe. The CME Liquidity Tool allows traders to measure current and historical liquidity of CME Group futures products across asset classes, free of charge. Armed with around-the-clock liquidity data, clients can capitalize on new trading opportunities in increasingly deep and liquid CME Group futures markets across time zones around the globe.

Liquidity is an important measure of participation in any given futures market, because it indicates how easily a market user can enter and exit their positions. The greater the participation, in the form of open buy or sell orders, the more liquid the product is likely to be.

Julie Winkler, CME Group Chief Commercial Officer

“Liquidity in our CME Group futures markets has grown dramatically over the last five years, particularly during European and Asian trading hours,” said Julie Winkler, CME Group Chief Commercial Officer. “Our new CME Liquidity Tool offers market users a cost-effective and efficient way to analyze complex liquidity data of core futures products to inform their trading and hedging strategies.”
“Citi plans to use the CME Liquidity Tool as an additional resource to help global clients better understand various products’ liquidity profiles throughout the 24-hour trading day,” said Stephen Christian, Managing Director, Citi Futures, Clearing and Collateral.

For the first time, the CME Liquidity Tool offers a way to view and export charts measuring market liquidity on a daily, weekly, monthly, quarterly and yearly basis, during periods of varying market volatility across North American, European and Asian trading hours. The tool measures market liquidity based on three key measures of market liquidity and cost:

Bid-ask spread, or the difference between the prices quoted to buy and sell futures;
Book depth, which is the number of contracts in both buy and sell orders at a given price; and
Cost to trade, which is the amount it will cost in ticks equal to the minimum bid-ask spread to buy or sell a specific order size.

The data science and analytics technology underpinning the CME Liquidity Tool processes more than 70 billion records per month, providing market participants with a faster, cost-efficient way to analyze historic market data of core CME Group futures products.

For more information or to access the CME Liquidity Tool, please visit www.cmegroup.com/liquiditytool. The tool is available to any user who signs up for a free CMEGroup.com account.

Block Trading Going Well on CME, Per Report

July 8, 2018 by Michael Volpe Leave a Comment Filed Under: Feature Articles Tagged: Block Trading, CFTC, CLOB, CME, DMO, futures, National Grain and Feed Association, options, spread trades

Approximately six months in, worries about block trading on the CME have been overblown.

A new report conducted by the Commodities Futures Trading Commission’s Market Intelligence Division analyzed block trading which the CME first implemented in January 2018.

Block trading is, “privately negotiated futures/options transactions permitted to be executed away from the central limit order book and are subsequently submitted to CME Clearing.” The CFTC said in a statement.

“Prior to the CME’s January launch of block trading, the CFTC heard various concerns from some members of the industry – most importantly, that block trades could reduce liquidity from the central limit order book (“CLOB”) and could reduce price transparency.” The CFTC further noted in its report.

Instead, the CFTC found:

Block trades are insignificant compared to total volume, but the analysis shows block trades can be a significant percent of the total volume in an individual contract month on specific days.
DMO staff observed no increase in block trade volume relative to total volume.
Over 75% of block volume is in the nearby months.
Almost 65% of block futures volume is being offset in the CLOB for the same contract expiration on the same day.
Yes; they (block trades) are in compliance with CME rules.

The CFTC further noted: “In a recent Wall Street Journal article, the National Grain and Feed Association expressed a wariness ‘of increasing futures volume moving into blocks… [fearing] if volumes grow too large it could limit market participation, especially for relatively smaller hedgers.’ Three months is probably too small of a data set to determine if agricultural blocks add or subtract from total volume.

“However, the data shows that the number of block trades is not increasing and, the block volume and block share of volume are also not increasing. Of note, the large record block volume of almost 30,000 contracts on February 8, 2018 was primarily due to two large block corn spread trades. On this day, block trade volume was the highest percentage observed to date at 1.2% of total agricultural volume on that day, about 4% of the March corn volume, and 6% of the May corn volume. DMO staff will continue monitoring this situation and report any significant changes.”