PUBLISHED Q3 2020

The FX Report
Solving market challenges
FX Futures
FX Options
FX Link
EBS

Subscribe to all our product news at cmegroup.com/thefxreport
Join the conversation at linkedin.com/company/foreign-exchange

1

IN THE MARKETSIN THISREPORT:

A quarter of parts – pandemic, participants, progress,
and solving market challenges
By Paul Houston, Managing Director, FX Products

In the Markets
A quarter of parts – pandemic,
participants, progress, andsolving market challenges This quarter saw much lower volumes across the FX
market, relative to the excitement of the first quarter.
The impact of zero interest rates, working from home,
and the market-wide deleveraging combined to dampen
activity. Despite this, the FX team at CME have been
active across a number of initiatives, aiming to ensure
our products continue to be as accessible, efficient, andcost-effective as possible.

In the news
A view on G5 – volatility, event
risk, opportunity In our markets
Fulfilling demand for transparency
in swaps, options, (and quotes)
with new analytical tools In our markets
Focused on reducing costs
through product enhancements
and programs In particular, in this edition we have highlighted new
analytical tools, which are aimed at bringing both
greater transparency to the marketplace ‒ as well as
providing richer information to participants to aid theirdecision-making.

Need to know
Futures and options: From G10
to EM Need to know
Spot, forwards and NDFs: The
future has begun for EBS 
How to... 

The first of these is the CME Swap Rate Monitor, launchedthis quarter and available for free on cmegroup.com.
This tool shows: (a) current and historical access to FX
Link pricing, which is potentiallyan important transparent data
NEW: VOL CONVERTER TOOL
source for customers given the
Launching Sept 2020
OTC FX swap market has no
Listed FX Options
central primary pricing CLOB and
EBS Spot(b) combines FX futures and FX
Global FX Market
Link pricing to calculate implied
EBS NDFs
Listed FX Futuresinterest rate differentials acrosscurrency pairs ‒ highlighting
areas where investment andCME FX Link
EBS Forwards
trading opportunities could beexecuted using FX Link as a
NEW: FX SWAP RATE MONITOR
trading mechanism.
Live June 2020
Options 4%Now, whichever
instrument you
trade, you can do sowith the certainty of
CME Group.
CME cash and listed FX
products offer absoluteand additional liquidity tobilaterally traded FX swaps,
options, spot, forwards
and NDFs.

Currency Swaps 2%

Available in 24 currency
pairs, with weekly andmonthly expiries on Mondays,
Wednesdays and Fridays.

Spot 30%

NDFS 4%

BIS 2019 Survey

Available in Asian, SouthAmerican and now African
currencies vs USD covering
1M, EOM and monthly rolls

Available to trade in over
60 currencies pairs across
EBS Market and EBS Direct
and a primary market for
EUR, JPY, and CNH

Available in more than 40
currency pairs and used
as a proxy for OTC spot
& forward outrights.

Calendar spreads also act
as a proxy for OTC FX swaps.

Swaps 49%

Available in 8 currency pairs.
Provides a cleared, standardized
and credit efficient alternative
to FX swaps.

Data: Percentages according to 2019 BIS Triennial Survey, based on foreign exchange turnover
Expirations or availability of currencies may only be available on certain currencies or platforms

Outright Forward 11%

Available in more than
120 currency pairs as bothoutright Forwards and Swaps

The second is the CME OTC Vol Converter Tool, scheduled
for launch in September and currently in pilot with anumber of customers. This tool displays CME listed FX
options in an OTC equivalent volatility surface acrossthe G5 currencies. It offers numerous rich functionalities,
including tradeable bid/offer spreads with drilldown to theunderlying CME contracts.
A huge amount of resources and effort has gone intocreating these tools, and we hope you will find value inlearning more about them in our report. This edition also
features the upcoming plans for EBS. EBS Market has
a prominent role in the spot FX market, and the Q&A
interview with Jeff Ward outlines the details and decisions
behind these changes. I would like to wish everyone thevery best, and thank you for the continued support of
CME FX products.

More than a product:
A source of reliability in market stressH1 2020: Averaged$83.2bn notional traded in Futures and Options$80.0bn traded in Spot on EBS$232bn in Open Interest in Futures and Options

2

IN THE NEWSIN THISREPORT:

A view on G5 – volatility, event risk, opportunity

In the Markets
A quarter of parts – pandemic,
participants, progress, andsolving market challenges 
In the news
A view on G5 – volatility, event
risk, opportunity In our markets
Fulfilling demand for transparency
in swaps, options, (and quotes)
with new analytical tools In our markets
Focused on reducing costs
through product enhancements
and programs 
Need to know
Futures and options: From G10
to EM Need to know
Spot, forwards and NDFs: The
future has begun for EBS 
How to... 

By Erik Norland, Senior Economist
In Q2 2020 the biggest currency pairs traded quietly, withlittle movement in either EUR/USD, which rose 1.8% versus
the US dollar, or USD/JPY, which was nearly unchanged.
Brexit negotiations weighted on GBP, which fell by 1%
versus USD and by 3% versus EUR, a small move byhistorical standards. As the coronavirus receded in China,
offshore renminbi strengthened by 1.5% versus USD.
The real action was further afield. As China and othernations reopened their domestic economies, commodity
prices recovered from their lows, pulling CAD 4% higher
versus USD while AUD rallied 12% over the course of thesecond quarter.
While currency movements were generally quite small
during the second quarter, options traders appear
concerned about the prospect for future volatility. Implied
volatility on many of the currency options was about onethird higher at the end of June 2020 than it had been prepandemic. There are a variety of factors that may be ofconcern to currency market participants including:1	Divergent pandemic outcomes: The coronavirus
pandemic appears to have receded in some countries,
while new cases continue to rise in other countries.
How might it impact the currency markets if somecountries move towards a second lockdown whileothers do not?
2	The possibility of divergent monetary and fiscal policies:
Among the major currency pairs, fiscal and monetary
policies were remarkably similar in Q2. Most central
banks cut rates towards zero, if they weren’t there
already, and expanded their balance sheets. Fiscal
policy also saw increases in public spending anddeficits to offset the impact of social distancing.
Going forward, fiscal and monetary policies may
begin to diverge as different currency areas curtail the
exceptional measures more quickly than others. Thismay be particularly acute if some countries opt for
renewed lockdowns while others do not.
Read, watch, and listen to more insights from Erik
Norland and Blu Putnam, our Chief Economist 

STAY UP-TODATE WITH
FAST-MOVINGMARKETS.
SUBSCRIBE 3

IN OUR MARKETSIN THISREPORT:

Fulfilling demand for transparency in swaps, options, (and quotes)
with new analytical tools

In the Markets
A quarter of parts – pandemic,
participants, progress, andsolving market challenges 
In the news
A view on G5 – volatility, event
risk, opportunity In our markets
Fulfilling demand for transparency
in swaps, options, (and quotes)
with new analytical tools In our markets
Focused on reducing costs
through product enhancements
and programs 
Need to know
Futures and options: From G10
to EM Need to know
Spot, forwards and NDFs: The
future has begun for EBS 
How to... 

FX SWAP RATEMONITOR TOOL

Swaps: Get to know the FX Swap Rate Monitor– live since June 2020

Options: Introducing the Vol Converter –launching Sept 2020

The OTC FX swap market, according to the latest BIS
survey, trades $3.2 trillion daily. Despite this volume, there
is no primary market that offers a firm, central OTC pricing
source. FX Link addresses this by providing a firm CLOB
tradeable spot starting IMM swap across eight currency
pairs, traded and cleared on CME’s markets. With therecent launch of CME FX Swap Rate Monitor, whichdisplays FX Link pricing in a current and historical view,
participants have access to a public reference FX swap
rate ‒ for the first time ever, at no charge. This new tool
also combines FX Link pricing with FX futures pricing tocalculate implied interest rate differentials across the eightcurrency pairs ‒ available in a current and historical viewand highlighting potential investment opportunities.

For the first time, traders will be able to compare listed
FX options and OTC FX options in one screen – bringing
a unique level of price transparency and comparability.

Since the product launch, many participants have signed
up to use the tool, available now on cmegroup.com.

ACT – On the optimal trade, with the ability to analyze price divergences in alldeltas and all maturities

This new tool will calculate and convert listed CME FX
option premiums, fixed strike data, rules, and formats– into an OTC-equivalent volatility surface, in OTC
standard tenors, deltas, and quote conventions –creating comparable pricing across major options pairs.

Vol Converter Tool
LIVE – September 2020
EVALUATE – OTC-equivalent pricing across eight tenors and a full delta surface
DISCOVER – The underlying CME contracts driving each value

Get to know the tool, the calculation, and read about
different ways it can be applied.

FX Swap Rate Monitor Tool
LIVE – June 1, 2020
PROGRESS – Over 700 views
FOLLOW – Market information on FX swap pricing and daily changes, delayed
only by 10 minutes
VIEW – Implied interest rate differentials for eight currency pairs as they develop
IDENTIFY – Potential areas of opportunity using FX Link
Sign up and see 

USE THE FXSWAP RATEMONITOR,TRACK IMPLIEDINTEREST RATEDIFFERENTIALSACROSS EIGHTCURRENCYPAIRS Bringing transparency to Request for Quote
See how our new Directed Request For Quote (DRFQ)
functionality enables you to get more quotes easily,
from more of your chosen liquidity providers 

VOL CONVERTER
TOOL

4

IN OUR MARKETSIN THISREPORT:

Focused on reducing costs through product enhancements
and programs

In the Markets
A quarter of parts – pandemic,
participants, progress, andsolving market challenges 
In the news
A view on G5 – volatility, event
risk, opportunity In our markets
Fulfilling demand for transparency
in swaps, options, (and quotes)
with new analytical tools In our markets
Focused on reducing costs
through product enhancements
and programs 
Need to know
Futures and options: From G10
to EM Need to know
Spot, forwards and NDFs: The
future has begun for EBS 
How to... 

Enhancing FX Link: New functionality,
built for better spread trading
Historically in order to transact on FX Link, a customer
must trade directly into the Globex central limit orderbook (CLOB). C-Cross and RFQ functionality provides
participants and liquidity providers with an alternative formof execution, enabling larger order sizes to be negotiatedpre-execution and subsequently submitted through Globex.
This method of execution is closer in nature to the existing
OTC FX swap market, enables brokers to be used, andoffers participants the ability to execute larger trade sizes
by accessing additional liquidity that isn’t immediately
present in the order book.
Read the SER: Live July 27, 2020 
An SER is a Special Executive Report – released by
CME Group whenever there is a rule change to our
products or markets.
WHAT: Agree in advance size, price, and direction ‒ prior toentering an order in Globex
HOW: BPVM (Better Price or Volume Match) percentages
on all outright FX futures equal to 50%, in line with thecurrent levels for all FX options

Expanding options: Solving for the short end
In February, we expanded our short-term options
to include Monday expiries. We now offer Monday,
Wednesday, and Friday expiries. As the consequences of
Covid-19 have been felt across the globe, the market has
increasingly turned to these contracts in order to manageand express risk.
NEW: Everything you need to trade FX options 
Notably, average daily volume in Mondays expiries
increased by 107% in June compared to May.
NEW: Resources created specifically for intermediaries 
As demand has grown, so has the range of solutions weoffer – from more strikes, to more maturities, and aligning
our expiries to the 10 a.m. NY cut. Now, we’re making ourmarkets more accessible to our network of intermediaries
to help more participants use our centrally-cleared, capitalefficient model – and more compelling to participants
who need to express large risk transfer, contributing to allparticipants’ TCA.

WHY: Standardizes CME’s Globex crossing mechanism
across the entire listed FX complex, enabling FX Link to be
used as an even better proxy for bilateral FX swaps.

Manage risk with the new large trade fee reduction for
FX options traders with large risk transfer needs. However you
execute – the cost has been reduced by half for 12 months to
help traders around the world manage risk.

Find out more about this functionality, how it works,
and how to take advantage of it 

Find out how to participate 

SIGN UPFOR FX LINKVOLUMEALERTS,DELIVERED TO
YOUR MAILBOXWEEKLY IN THISREPORT:
In the Markets
A quarter of parts – pandemic,
participants, progress, andsolving market challenges 
In the news
A view on G5 – volatility, event
risk, opportunity In our markets
Fulfilling demand for transparency
in swaps, options, (and quotes)
with new analytical tools In our markets
Focused on reducing costs
through product enhancements
and programs 
Need to know
Futures and options: From G10
to EM Need to know
Spot, forwards and NDFs: The
future has begun for EBS 

Analyzing the June roll: Assessing improved
price discovery

Reducing the cost to trade: Reducing Minimum
Price Increments

Cost of execution improvement: EUR, JPY, CAD, and AUD
were all quoted at .2 throughout the two-week roll period.
EUR was at the MPI, approximately 99% of RTH, with
JPY at the MPI, 90% of RTH. Both CAD and AUD werequoted at the .2 MPI, approximately 99% and 95% of RTH
respectively. GBP was at .5, 96% of RTH.

The backdrop of Covid-19, a move to SA-CCR for the
calculation of counterparty credit risk exposures, andthe Uncleared Margin Rules continue to bring attention
to the potential costs and benefits of clearing for both
FX FWDs and FX swaps. In response to client feedback,
we have been reducing the minimum price increment for
the quarterly roll in the G5 pairs by 50-60% in order tomaterially reduce the cost to trade, making the use of FX
futures more cost effective than ever before.

Read more 
About how we have improved TCA, and how to
consider the quantitative and qualitative factorsthat affect it

Lower Cost of Execution with CME FX Calendar Spreads
CAD

AUD

GBP

JPY

EUR

$7.00

Efficiency of the roll: CME’s Pace of the Roll tool indicatesthat the transference of open interest was above thehistorical average across nearly all of the G5 currencies,
with EUR (85%) at 8% above the historical average, JPY
at 78% (+7% vs. avg.), GBP at 77% (+5% vs. avg.), CAD at
78% (+10% vs. avg.), and AUD at 63% (-6% vs. avg.).

How to... 

$6.25

$5.00
$4.00

$5.00

$5.00
60%
Savings

50%
SavingsPair

OI Rolled –Q2 2020OI Rolled –Prior 4

Change vs.
Average

EUR

85%

77%

+8%

JPY

78%

71%

+7%

GBP

77%

72%

+5%

AUD

63%

69%

-6%

CAD

78%

68%

+10%

$6.25

60%
Savings$3.125

$3.00
$2.00

60%
Savings

60%
Savings
$2.50

$2.00

$2.50

$2.00

$1.00
$-

Initial MPI

June Pace of the Roll: G5 Pairs

$6.25

$6.00

Tick Value

5

Reduced MPI

Savings assumes aggressing execution
at minimum price increment

The use of FX futures as a cleared derivative enables
CVA charges to be removed as well as the netting of
exposures and cash flows against CME ‒ optimizing
capital costs as well as operational workflows. In addition,
the residual exposure attracts a much lower counterparty
risk weighting for risk weighted asset calculations, a costthat can be relevant on a direct or indirect basis for some
OTC FX transactions.

WATCH THE
ROLL AS IT
DEVELOPS,USE OUR PACE
OF THE ROLL
TOOL, TO HELPYOU ANALYZEYOUR ROLLSTRATEGY 

6N E E D TO K N O W

IN THISREPORT:

Futures and options: From G10 to EM

In the Markets
A quarter of parts – pandemic,
participants, progress, andsolving market challenges 
In the news
A view on G5 – volatility, event
risk, opportunity In our markets
Fulfilling demand for transparency
in swaps, options, (and quotes)
with new analytical tools In our markets
Focused on reducing costs
through product enhancements
and programs 
Need to know
Futures and options: From G10
to EM Need to know
Spot, forwards and NDFs: The
future has begun for EBS 
How to... 

Key Stats
As the world reflects on the events of Q2 and the memorable activity across financial instruments and commodities,
volume in our markets followed global trends as participants looked to express risk. Often turning to our markets to gain theprice certainty and transparency they sought, and to find the liquidity they needed.

EUR/USDA S S E T M A N AG E R S

AU D/ U S D

Traded $31.1B in notionalin H1, equivalent to$219K+ contracts.

Held 48% of all
open interest in
EUR/USD.

Open interest was up
12% YTD, at 587,813.

Use this tool to explore
Open Interest, using CFTC data Traded $7.19B in notionalin H1, equivalent to 107,849
contracts. YTD open interest
averaged 149,198 contracts.
See the contract 

See the contract 

B U I LT F O R E V E N T R I S KOPEN INTERESTE M PA I R S

Volume in Monday
FX Options Expirations
increased by 107% inJune over May.

$9B across all
Weekly options expiries:
Monday, Wednesday,and Friday

Volume grew to 83K
contracts YTD ‒ driven by
BRL up 54%, ZAR up 80%,
and RUB up 41%.

Get the codes andget to know the expiries 

Use this heatmap tool to explore
open interest 

Follow the volume in our EM pairs 

FOLLOW
THE VOLUME
WHENEVER
YOU WANTTO, ADD THE
CONTRACTS
YOU WANT TO
WATCH TO MY
PORTFOLIO 

7

N E E D TO K N O W

IN THISREPORT:

Spot, forwards and NDFs: The future has begun for EBS

In the Markets
A quarter of parts – pandemic,
participants, progress, andsolving market challenges 
In the news
A view on G5 – volatility, event
risk, opportunity In our markets
Fulfilling demand for transparency
in swaps, options, (and quotes)
with new analytical tools In our markets
Focused on reducing costs
through product enhancements
and programs 
Need to know
Futures and options: From G10
to EM Need to know
Spot, forwards and NDFs: The
future has begun for EBS 
How to... A discussion with Jeff Ward, Managing Director, EBS, on future plans and the benefit and value it will bring to the market.
The integration of EBS Market onto
CME Globex is the first step in bringing
to market a cohesive offering acrosslisted futures, options, and cash FX.
Q1 What are your plans for EBS Market,
as a primary and central source of liquidity
for so many OTC FX products, currencies,and customers?
A: EBS Market, our CLOB, will be integrated
with CME Globex, with a distributed
matching model in London and New York.
Each engine will be a single source of global
liquidity – in EM and G10 respectively. This
new design enables us to fulfil one clear ask
from the marketplace – to simplify. We’ll dothis by concentrating liquidity, decreasing thetechnology investment required to access it,
and by reducing operational risk as books
get passed from desk to desk.
Q2 And, as bilateral relationship trading
evolves, will EBS Direct?
A: EBS Direct creates optionality for ourclients. On this platform, we are retaining
the existing order routing model, whilst replatforming and upgrading the underlying
technology and architecture to increase speed
and flexibility – so we can keep meeting
demand for this type of bilateral liquidity.

Q3 Credit challenges remain top of mind formany participants, can EBS help solve for this?
A: We’re bringing to market an enhanced
credit model, which will enable more
efficient credit management, by enablingcustomers to share credit across ourplatforms, leverage Net Open Position Credit
if desired, and to consolidate regional credit
to a single global limit.

EBS remains on course to integrate
EBS Market with CME Globex by theend of 2021
Find out more about EBS 
Q4 What sets EBS apart from other
OTC platforms?
A: We want to do more than provide
best-in-class liquidity, we want to benefit
participants through the development ofadditional tools in which they can analyze
their own trading, fill ratios, liquidity providers‒ to better inform decision making. Quant
Analytics does this, exceptionally. Again,
we’ve looked at the technology, and we’remaking it even better. We’re now thinking
about integrating the EBS platforms with theexisting CME offerings for FX futures, options,and listed and cash interest rates ‒ creatingcomplementary value with the tools alreadyin place.

Q5 As markets change, are you seeing
demand for your products from new anddifferent clients?
A: EBS is synonymous with OTC FX. Our
history established us at the heart of FX
market structure, and for many interdealers,
execution – from the key pad to the screen.
We’re seeing the asset management
community increasingly make that same ask
of us – with growing adoption of our EBS
Institutional platform. Uniquely, this platform
is designed for portfolio managers. Theirneeds have shaped every aspect of the build– from trade, to best ex, with built in pre-trade
Execution Cost Analysis and post-trade TCA.
It’s interesting to see that 48% of OI in CME’s
EUR/USD futures is held by this segment,
as this community increasingly turns to ourcomplementary cash and listed solutions.
Q6 Finally, how would you summarize
what the future of EBS will bring to market
participants?
A: Our goal is to be as relevant for our clientsin another 25 years as we are today bycreating a platform for liquidity, analytics,
and efficient risk management. Built tobenefit all participants – from front to backoffice, from global banks to regional asset
managers – by re-platforming, re-designing,
and recognizing what the market needs.

Read more about the market view:
Read Jeff Ward’s interview with Colin
Lambert, Managing Editor of Profit&Loss 

Are you an existingclient of EBS?

WATCH OURWEBINAR TO
SEE ALL THE
DESIGNS,BENEFITS AND
DETAILS 
support.ebs.com

8
IN THISREPORT:

How to...
Learn about how listed FX markets operate - watch our modules In the Markets
A quarter of parts – pandemic,
participants, progress, andsolving market challenges 

Find out more about blocks – with this complete guide 

In the news
A view on G5 – volatility, event
risk, opportunity 

Use our options market as an intermediary – and why you should In our markets
Fulfilling demand for transparency
in swaps, options, (and quotes)
with new analytical tools Access our G7 futures markets as an asset manager – and why others are 

Stay connected to everything occurring in our markets – subscribe to The FX Report Speak to a member of our team – contact fxteam@cmegroup.com In our markets
Focused on reducing costs
through product enhancements
and programs 
Need to know
Futures and options: From G10
to EM Need to know
Spot, forwards and NDFs: The
future has begun for EBS 
How to... cmegroup.com
Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken by investors who are Eligible Contract
Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and swaps each are leveraged investments and, because only a percentage of acontract’s value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds thatthey can afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any one trade because traders cannot expect to profit on every trade.
CME Group, the Globe Logo, CME, Globex, E-Mini, CME Direct, CME DataMine and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc. CBOT is atrademark of the Board of Trade of the City of Chicago, Inc. NYMEX is a trademark of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All othertrademarks are the property of their respective owners.
The information within this communication has been compiled by CME Group for general purposes only. CME Group assumes no responsibility for any errors or omissions. Additionally,
all examples in this communication are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market
experience. All matters pertaining to rules and specifications herein are made subject to and superseded by official CME, CBOT, NYMEX and COMEX rules. Current rules should be
consulted in all cases concerning contract specifications.
Copyright © 2020 CME Group Inc. All rights reserved.

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