Chicago Mercantile Exchange Inc. (CME) and Reuters have signed a landmark agreement that allows CME to offer its electronic foreign exchange (eFX) markets to Reuters' global customer base in a spot equivalent format.
The agreement, signed in May, marks the first major linkage of sell side traders in the interbank FX market to CME eFX futures markets, where hedge funds and other major buy side participants play a major role.
The service will go live in the fourth quarter and will be initially available in London, with roll out to additional markets in Europe, Asia and North America following. Participants would only require minor technical adjustments to their existing Reuters workstations for connectivity.
The deal significantly expands CME's distribution and enhances Reuters customers' ability to seamlessly trade FX spot, forwards and futures. Reuters FX Dealing 3000 in 3,500 institutions located in 123 countries will be able to access CME's electronically traded eFX futures markets. For the first time CME's eFX futures markets will be directly accessible by a significant cross section of the interbank FX spot trading community.
Under the agreement, CME's eFX markets, traded on its GLOBEX® platform, will be accessed via Reuters Dealing 3000 desktop with straight through processing of trades in Reuters Ticket Output Feed (TOF) standard. Quotes on CME's eFX products will appear in spot (or cash) equivalent terms to further ease usage for cash market participants by facilitating price comparisons between the two markets, potentially bringing greater pricing efficiencies to both.
Because of the financial guarantees provided by CME's Clearing House, banks will also be able to trade with non-bank participants in a credit-enhanced environment. In order to facilitate the order execution and risk management, Reuters and CME have selected FFastFill and Future Dynamics independently to provide the related services.
Mark Robson, Global Head of Treasury and Fixed Income, Reuters, said: "FX trading is experiencing strong growth and attracting new interest from both banks and the wider financial marketplace. Reuters aims to capitalize on these trends and benefit its customers through this alliance with CME. Reuters Dealing 3000 users will gain simplified access to FX execution and straight through processing, whilst increased inter-bank trading onto CME will enhance price discovery and the liquidity available to the whole marketplace."
Chicago Mercantile Exchange provides the world's largest regulated marketplace for foreign exchange trading. Reuters, an international leader in financial information and analytics, which serves 427,000 financial professionals worldwide, provides the world's leading FX platform for spot and forwards trading.
"CME's FX markets are in the midst of one of their most robust growth periods ever, driven largely by eFX volume which was up152 percent in the first quarter 2004 versus year ago levels. While CME's total FX volume has recently averaged as much as USD 22 billion per day in notional value, we think we can capture a larger share of the over USD 500 billion in average daily FX spot and forward outright market activity through our agreement with Reuters," said CME CEO Craig Donohue. "In conjunction with our recently announced eFX incentive pricing program, CME is clearly committed to the continued global expansion of its FX franchise."