Back to top

Image: Bigstock

CME Group (CME) Introduces FX Options Vol Converter Tool

Read MoreHide Full Article

CME Group Inc. (CME - Free Report) unveiled FX Options Vol Converter tool to price the company's listed FX options liquidity in over-the-counter (OTC) terms and ensure best execution for trading strategies.

The newly introduced FX Options Vol Converter calculates and converts listed CME FX options premiums, fixed strike data, rules and formats into an OTC-equivalent volatility surface, in OTC standard tenors, deltas, and quote conventions. It helps in creating comparable pricing across major options pairs.

CME Group offers the largest, all-to-all electronic venue for trading FX options in the world with listed options in 24 currency pairs. It has been evolving and restructuring FX options to create a better proxy for the OTC FX market and to enable more participants to easily access capital efficiencies and liquidity of markets.

In the recent years, CME Group has aligned its listed FX options offerings with over-the-counter market conventions to make them a more familiar and attractive alternative for OTC FX market practitioners seeking capital and cost-effective solutions.

This Vol Converter tool provides price transparency between the OTC and CME options markets with alignments in style, value date, expiration time, and underlying price convergence so that market participants can monitor price relationship and make more informed decisions across both markets.

It enhances transparency and improves decision making. Traders can evaluate OTC-equivalent pricing across eight tenors and a full-delta surface and drilldown into the underlying CME contracts driving each value.

CME listed FX options provide transparency, low-cost trade executions and capital-efficient risk management capabilities that are quickly becoming critical in today’s increasingly regulated markets. The launch of electronic trading in FX options at CME Group fueled strong growth with daily turnover in excess of 90,000 contracts by 2017,  the equivalent of over $10 billion notional, with 98% traded electronically.

Approximately 98% of CME FX options are transacted electronically on CME Globex. CME FX options on CME Globex display robust market liquidity that is highly competitive with the bilateral OTC FX options market. Trading flow in CME FX options is consistent with global markets.

A recently released Greenwich Associates report indicates that CME FX options will require significantly less margin and capital and could be as much as 86% more capital efficient than bilateral positions.

For over 45 years, CME Group has been defining, developing and diversifying access to FX markets via futures for customers around the world.

Shares of this largest futures exchange in the world in terms of trading volume as well as notional value traded has declined 18.2% in the past year against the industry’s increase of 2%. Nonetheless, the company’s policy to ramp up its growth profile and capital position should continue to drive shares higher.



 

The stock carries a Zacks Rank #4 (Sell).

Stocks to Consider

Some better-ranked stocks from the finance sector include MoneyGram International Inc. (MGI - Free Report) , OTC Markets Group Inc. (OTCM - Free Report) and Virtu Financial, Inc. (VIRT - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MoneyGram provides money transfer services in the United States and internationally. It surpassed estimates in two of the last four quarters, with the average earnings surprise being 14.77%.

OTC Markets engages in the financial market business in the United States and internationally. It surpassed estimates in three of the last four quarters, with the average earnings beat being 10.54%.

Virtu Financial provides market making and liquidity services through its proprietary, multi-asset, and multi-currency technology platform to the financial markets worldwide.  It surpassed estimates in three of the last four quarters, with the average earnings beat being 10.19%.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>