CME Group has announced plans to launch spot FX basis spreads on its electronic trading platform, in partnership with Citi’s FX prime brokerage business.
The CME FX Link will allow trading of an OTC spot FX contract and a CME Group FX futures contract via a single spread trade on the exchange’s Globex platform, for more efficient credit line management across both markets.
Citi’s prime brokerage unit will act as a central prime broker for the spot FX transactions, so participants can use existing OTC FX interbank credit relationships and the OTC FX prime brokerage network.
Paul Houston, global head of FX products at CME Group, explained the integration between futures and the OTC FX marketplace will improve access to the exchange operator’s FX futures market.
“OTC FX market participants will benefit from the capital and regulatory advantages of listed futures as well as optimising credit lines through facing a central counterparty,” he said.
Sanjay Madgavkar, global head of FX prime brokerage at Citi, added: “By applying the capabilities of our leading global FX prime brokerage business, we believe we can help FX market participants to manage their exposures across both markets more effectively."
The CME FX Link is expected to launch in the first quarter next year.