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CMECME®® FX FX
Chicago Mercantile Exchange Inc.® Yoshio KunoChicago Mercantile Exchange Inc.® Yoshio Kuno
芝加哥商业交易所驻东京事务所所长 久野喜夫 芝加哥商业交易所驻东京事务所所长 久野喜夫
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 2
Table of ContentsTable of Contents
• Global FX Market Overview
• CME FX Overview Product Suite
Growth
• OTC Spot, FWD SWAP markets
How FWD Gets Fixed and Dealt
OTC (including Interbank) FX vs. CME®FXOTC (including Interbank) FX vs. CME®FX
Interbank FX FWDInterbank FX FWD Price vs.Price vs. CME® FX PriceCME® FX Price
Spot Equivalent PricingSpot Equivalent Pricing
www.cme.com/e-quivalents
Market Tools
www.cme.com/fx
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 3
Global FX Market OverviewGlobal FX Market Overview
Foreign Exchange Worldwide
•The worldwide Foreign Exchange market – $1.9 trillion per day (BIS 2004)
•Spot and forward outright trading = $850 billion
•FX forward swaps = $950 billion
•FX options = $117 billion
•Hedge Funds have recently become more dominant in the FX market
•Total assets under management have risen to more than $1 trillion
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 4
Global FX Market OverviewGlobal FX Market Overview
Foreign Exchange Worldwide
•Banks remain the largest liquidity providers in the market
•Account for about 56% of the overall market volume
•The top 6 banks control approx 40% of the market
•The interbank spot market is almost entirely electronic
•In excess of 80% of trading volume
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 5
OTC FX Market CharacteristicsOTC FX Market Characteristics
Forward Swaps$944
Spot$387
Options$107
Forwards Outrights$208
Global Foreign Exchange-Daily Notional Value (billions)
Spot Market Volume-Daily Notional Value
(billions)
Interbank$301
CTA’SHedge Funds
$218
Corporates$108
Method of Interbank Execution
Electronic
90 %
Direct & Brokered10%
Geographic Volume Distribution
Europe
59%
North America22%
Asia19%
*Source: BIS Survey 2004
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 6
CME® FX Overview
Foreign Exchange at CME
• CME is the world’s largest market for exchange-traded currency futures
• Products are traded virtually around the clock on the electronic,1 floor and exchange for physicals2 platforms
1 E-mini Japanese Yen and E-mini Euro FX are traded solely on the electronic platform
2 Exchange for Physicals allow over the counter, or cash market, trades to be pre-arranged and subsequently booked through CME clearing house in order to eliminate counterparty credit risk
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 7
CMECME®® FX FX
CME FX - The World’s premier FX futures market
A global FX market place
36 available currency products
33 currency pairs (see complete list on following page)
2 E-mini Contracts: Euro and Yen Top 7 pairs
Euro/USD, USD/JPY, USD/CAD, USD/CHF, GBP/USD, USD/MXN, AUD/USD
CME$Index
Dynamic growth
CME electronic FX markets grew by 151% in 2004 vs. 2003
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 8
CMECME®® FX FX
United States DollarSwiss Franc (SF)
Swedish Krona (SE)South African Rand (RA)Russian Ruble (RU)Norwegian Krone (UN)
New Zealand Dollar (NE)Mexican Peso (MP)Japanese Yen (JY)Euro FX (EC)
Canadian Dollar (CD)British Pound (BP)Brazilian Real (BR)Australian Dollar (AD)
•CME$INDEX (USX)•AD/CD Cross Rate (AC)•AD/JY Cross Rate (AJ)•AD/NE Cross Rate (AN)•BP/JY Cross Rate (BY)•BP/SF Cross Rate (BF)•CD/JY Cross Rate (CY)•EC/AD Cross Rate (CA)•EC/BP Cross Rate (RP)
•EC/CD Cross Rate (CC)•EC/JY Cross Rate (RY)•EC/NKr Cross Rate (CN)•EC/SF Cross Rate (RF)•EC/SKr Cross Rate (KE)•E-mini Euro FX (E7)•E-mini Japanese Yen (J7)•SF/JY Cross Rate (SJ)
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 9
CME® FX futures products
Majors (ag USD) Emerging Markets (ag USD)
Cross-Rates
Australian Dollar (AD) Brazilian Real (BR) AD/CD ; AD/JY ; AD/ND
British Pound (BP) Czech Koruna (CZK) BP/JY ; BP/SF
Canadian Dollar (CD) Hungarian Forint (HUF)
CD/JY
Euro currency (EC) Mexican Peso (MP) EU/AD ; EU/BP ; EU/CD ; EU/JY ; EU/NOK
; EU/SEK ; EU/SF
Japanese Yen (JY) Polish Zloty (PLN) EU/CZK ; EU/HUF ; EU/PLN
New Zealand Dollar (NE)
Russian Ruble (RU) SF/JY
Norwegian Krone (NOK)
South African Rand (RA)
Swedish Krona (SEK)
Swiss Franc (SF)
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 10
• Euro FX:Euro FX: Cont Size: 125,000 Euro Cont Size: 125,000 Euro
Minimum move increment : 0.0001 (USD 12.50)Minimum move increment : 0.0001 (USD 12.50)
• J Yen:J Yen: Cont SizeCont Size : 12,500,000 J Yen : 12,500,000 J Yen
Minimum move increment: 0.000001 (USD 12.50Minimum move increment: 0.000001 (USD 12.50))
• Can Dlr:Can Dlr: Cont Size: 100,000 Can Dlr Cont Size: 100,000 Can Dlr
Minimum move increment: 0.0001 (USD 12.50)Minimum move increment: 0.0001 (USD 12.50)
• B Pound:B Pound: Cont Size: 62,500 British Pound Cont Size: 62,500 British Pound
Minimum move increment:0.0001 (USD 6.25)Minimum move increment:0.0001 (USD 6.25)
• Swiss FrancsSwiss Francs Cont Size: 125,000 Swiss Francs Cont Size: 125,000 Swiss Francs
Minimum move increment: 0.0001 (USD 12.50)Minimum move increment: 0.0001 (USD 12.50)
• AUS Dlr:AUS Dlr: Cont Size: 100,000 Australian DlrCont Size: 100,000 Australian Dlr
Minimum move increment: 0.0001 (USD 10.00)Minimum move increment: 0.0001 (USD 10.00)
Major CMEMajor CME®® FX Futures contracts FX Futures contracts
All open positions remaining at the end of last trading date are subject to physical deliveries.All open positions remaining at the end of last trading date are subject to physical deliveries.
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 11
0
70
140
210
280
350
2003200220012000 2004
294
1Q2005
Open OutcryCME Globex Privately Negotiated
ADVADV(round turns,(round turns,
in 000’s)in 000’s)
76
332
4-Year CAGR(2000 – 2004)
28%
2Q2005
CMECME®® Foreign Exchange/FX Foreign Exchange/FX Daily Average VolumeDaily Average Volume
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 12
CMECME®® FX FX
CME FX - The World’s premier FX futures market
Deep, liquid markets
Significant trading volume, meaningful liquidity
CME FX, notional trading volumes (matched trades):
Average daily turnover US$ 40 billion, March 2005
Record daily turnover, US$ 79 billion, December 6, 2004
CME FX on Globex, record daily turnover, US$ 51 billion, December 8, 2004
Previous record US$ 42 billion, set December 3, 2004
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 13
CMECME®® FX FX
CME FX - The World’s premier FX futures market
Transparency & anonymity, your gateway to best execution
Every price in the CME FX market is available for trading via CME central counterparty clearing
Eliminates need for bi-lateral credit lines
Real-time, dynamic prices and associated amounts displayed in a visible trading book
Best bid and offer
Next four best prices
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 14
CMECME®® FX FX
CME FX - The World’s premier FX futures market
Access to new trading partners, new liquidity
Credit efficient access to sell- and buy-side FX trading counterparties
All trades are backed by the financial strength of the Chicago Mercantile Exchange clearinghouse, which eliminates the need to establish and administer bilateral credit relationships
Buy-side (hedge funds, CTAs, prop traders, individual investors, etc.) are 50% of CME FX volume
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 15
FX Spot, Swap, FWDFX Spot, Swap, FWD
• FX SpotFX Spot
Usually trades between Banks (interbank) via brokers Usually trades between Banks (interbank) via brokers
(voice and electronic) or direct. For major currencies , (voice and electronic) or direct. For major currencies ,
a Spot trade is settled (delivery of currencies) with a Spot trade is settled (delivery of currencies) with
T+2 value dateT+2 value date
• FWDFWD
A FX trade with a certain future date( as agreed up by A FX trade with a certain future date( as agreed up by
trading parties) settlement (delivery of currencies). trading parties) settlement (delivery of currencies).
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 16
FX Spot, Swap, FWDFX Spot, Swap, FWD
• SwapSwap
A USD/JYen swap is Sale of USD against JYen with Spot Value A USD/JYen swap is Sale of USD against JYen with Spot Value
(T+2) or vis-à-vis and Purchase back of USD against JYen or (T+2) or vis-à-vis and Purchase back of USD against JYen or
vis-à-vis with agreed upon future value datevis-à-vis with agreed upon future value date
( standard transactions are usually with 1, 2,3,6, 9, 12 months ( standard transactions are usually with 1, 2,3,6, 9, 12 months
from Spot date) with the same counter party.from Spot date) with the same counter party.
Example : Assume. JYen 3 months (90 days) interest date is Example : Assume. JYen 3 months (90 days) interest date is
0.10% per annum and USD 3 months (90 days) interest date is 0.10% per annum and USD 3 months (90 days) interest date is
3.75% . You buy USD one million against JYen at 110 today 3.75% . You buy USD one million against JYen at 110 today
with value date of T+2 and sell USD back against JYen at 110 with value date of T+2 and sell USD back against JYen at 110
(same as T+2) with value date of T+2+90. You being long of (same as T+2) with value date of T+2+90. You being long of
USD for 90USD for 90 days, days, you can invest and earn USD1,000,000 X you can invest and earn USD1,000,000 X
3.75%X90/360= USD9,375. To finance the Yen short, you 3.75%X90/360= USD9,375. To finance the Yen short, you
borrow JYen 110,000,000 . The cost will be JYen borrow JYen 110,000,000 . The cost will be JYen
110,000,000X0.10%X90/360÷110=USD250. You can earn net 110,000,000X0.10%X90/360÷110=USD250. You can earn net
of USD 9,125 without risk.of USD 9,125 without risk.
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 17
FX Spot, Swap, FWDFX Spot, Swap, FWD
• SwapSwap
Instead, the 90 days USD/JYen Swap market goes this Instead, the 90 days USD/JYen Swap market goes this
way……. 1.01(Ask) 0.99(Bid):way……. 1.01(Ask) 0.99(Bid):Swap pointsSwap points. . Now you agreed to deal this transaction, 0.99 Now you agreed to deal this transaction, 0.99 Swap Swap
pointspoints with a counter party. What you have agreed with a counter party. What you have agreed
are: Buy USD1 million against JYen at 110.00 with are: Buy USD1 million against JYen at 110.00 with
value date of T+2 and Sell back USD 1 million against value date of T+2 and Sell back USD 1 million against
JYen at 109.01(110-0.99) with value date of T+2+90. JYen at 109.01(110-0.99) with value date of T+2+90.
You will lose FX but You will lose FX but gain Interestgain Interest.. The 0.99 you lost in FX approximately equals to 110X The 0.99 you lost in FX approximately equals to 110X
(3.75%-0.1%)X90/360=1.00375(3.75%-0.1%)X90/360=1.00375
In an essence, a Swap transaction is a trade of interest In an essence, a Swap transaction is a trade of interest
rates differential of a paired two currencies.rates differential of a paired two currencies.
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 18
How FX FWD Gets Fixed and DealtHow FX FWD Gets Fixed and Dealt
Example IIExample II : : Japanese A company expects to receive USD 1 million Japanese A company expects to receive USD 1 million
payment of its export in about 90 days. It intends to fix FWD rate with payment of its export in about 90 days. It intends to fix FWD rate with
its Bank Bits Bank B
1.1. A calls its Bank B to get a Spot USD/JYen quote and Bank B shows 110.00-00. A likes A calls its Bank B to get a Spot USD/JYen quote and Bank B shows 110.00-00. A likes
the rate and deals to sell USD 1 million at 110.00 (Spot). B Bank doesn’t hold the the rate and deals to sell USD 1 million at 110.00 (Spot). B Bank doesn’t hold the
position ( a long of USD 1 million) sells USD 1 million in the interbank market position ( a long of USD 1 million) sells USD 1 million in the interbank market
hopefully at a better than 110.00.hopefully at a better than 110.00.
2.2. Next, A requests Bank B the Spot transaction to be re-priced to T+2+90 days value Next, A requests Bank B the Spot transaction to be re-priced to T+2+90 days value
date.date.
3.3. Bank checks the 90 days Interbank Swap market and the market goes 1.00-0.98 and Bank checks the 90 days Interbank Swap market and the market goes 1.00-0.98 and
agreed with A to deal at 1.00 At the interbank market, the Bank agrees with a agreed with A to deal at 1.00 At the interbank market, the Bank agrees with a
counterparty (another bank) buys USD 1 million with value date of T+2 and Sell backcounterparty (another bank) buys USD 1 million with value date of T+2 and Sell back
4.4. UAS 1 million with the FX rate difference of 0.99 with value date of T+2+90.UAS 1 million with the FX rate difference of 0.99 with value date of T+2+90.
5. A company’s sales of USD 1 million against JYen with value of T+2+90 gets fixed at 109.00 (110.00-1.00)
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 19
How FX FWD Gets Fixed and DealtHow FX FWD Gets Fixed and Dealt
B Bank(T)B Bank(T)
Sells USDSells USD 11 MM to Market MM to Market (value Spot)(value Spot)
Buy USD1MM with Spot and SellBuy USD1MM with Spot and Sell
it back with Spot +90 value it back with Spot +90 value
date. The rate was 1.00date. The rate was 1.00
B Bank (T+2 )B Bank (T+2 )
Spot deliveriesSpot deliveries
Swap T+2Swap T+2deliveriesdeliveries @@ AAAAAA
Cust A (T) Cust A (T) with Bank Bwith Bank B
With T+2 With T+2 (( SpotSpot )) date,date, Agrees to sell USDAgrees to sell USD 11 MM MM
@110.00 to Bank [email protected] to Bank B
Request re price to SpotRequest re price to Spot++ 90days value date90days value date
USDYen
Yen
USD
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 20
How FX FWD Gets Fixed and DealtHow FX FWD Gets Fixed and Dealt
Bank B with Swap counter partyBank B with Swap counter party
(T+2+90:Spot+90days)(T+2+90:Spot+90days)
SwapSwap の(の( T+2T+2+90) deliveries+90) deliveries@@ AAA-0.99AAA-0.99
Cust A with Bank BCust A with Bank B
(T+2+90:Spot+90days)(T+2+90:Spot+90days)
USDYen
USDYen
FWD FX FWD FX deliveries deliveries @[email protected]
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 21
OTC (including Interbank) FX vs. CME®FX-IOTC (including Interbank) FX vs. CME®FX-I
OTCOTC CME®FXCME®FX
TradingTrading OTC/bilateral OTC/bilateral Exchange TradedExchange Traded
Counter Counter Party RiskParty Risk
Yes, Credit RiskYes, Credit Risk After deal is done, the After deal is done, the change guarantees trades. change guarantees trades. Brokers are supervised by Brokers are supervised by regulator.regulator.
Margin Margin Some depends on Some depends on credit of customercredit of customer
Exchange publishes Exchange publishes minimum required margin minimum required margin rates. rates.
RegulatioRegulationn
Varies /some have no Varies /some have no regulationregulation
US: CFTCUS: CFTC
SROSRO VariesVaries US: Exchanges, NFAUS: Exchanges, NFA
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 22
OTC (including Interbank) FX vs. CME®FX-IIOTC (including Interbank) FX vs. CME®FX-II
OTCOTC CME®FXCME®FX
Trading Trading UnitUnit
FlexibleFlexible Fixed. i.e. JYen Fixed. i.e. JYen 12,500,000/contract12,500,000/contract
Bid/AskBid/Ask Discretion by trading Discretion by trading partiesparties
Minimum increment is fixedMinimum increment is fixed
PricesPrices Discretion by trading Discretion by trading parties. Usually parties. Usually interbank is better interbank is better than cust. rates than cust. rates
Can trade the price you seeCan trade the price you see
Trading Trading HoursHours
Open 24 hours Open 24 hours but but depend on banks you depend on banks you deal withdeal with
currently23 hours a daycurrently23 hours a day
Price Price conventionconvention
Dlr/Yen: 111.05-10Dlr/Yen: 111.05-10
Euro/Dlr:1.2317-20Euro/Dlr:1.2317-20
Non US currency/Dlr:Non US currency/Dlr: Yen:9115-9116 Yen:9115-9116 (0.009115-0.009116)(0.009115-0.009116)
EuroFX:1.2320-21EuroFX:1.2320-21
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 23
Interbank FX FWDInterbank FX FWD Price vs.Price vs. CME® FX CME® FX PricePrice In Interbank pricing conventionIn Interbank pricing convention
Some currencies are quoted relevant currency per USD1.00, likeSome currencies are quoted relevant currency per USD1.00, like
Dlr/Yen, Dlr/Swiss FR. RMB, HKDlr.Dlr/Yen, Dlr/Swiss FR. RMB, HKDlr. Other currencies are quoted USD, cents per relevant currency like, Other currencies are quoted USD, cents per relevant currency like,
Stg/Dlr, Euro/Dlr.Stg/Dlr, Euro/Dlr.
All CME®FX contracts are quoted USD, cents per relevant All CME®FX contracts are quoted USD, cents per relevant
currency like, Stg/Dlr, Euro/Dlr.currency like, Stg/Dlr, Euro/Dlr.
CMECME®®FX contracts is futures contracts which have fixed FX contracts is futures contracts which have fixed
maturities (delivery dates). Those are usually 3maturities (delivery dates). Those are usually 3rdrd
Wednesdays of March, June, Sep and Dec. Theoretically a Wednesdays of March, June, Sep and Dec. Theoretically a
CME FX futures contract’s price should be close, if not CME FX futures contract’s price should be close, if not
same to interbank FWD market price with the same same to interbank FWD market price with the same
delivery date. And the two markets move parallel each delivery date. And the two markets move parallel each
other.other.
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 24
Interbank FX FWDInterbank FX FWD Price vs.Price vs. CME® FX CME® FX PricePriceExample:Example: August 17, 2005. Dlr/Yen Spot is being traded at August 17, 2005. Dlr/Yen Spot is being traded at
110.00 in the interbank market. 110.00 in the interbank market.
Dlr/Yen Swap points of Spot date Dlr/Yen Swap points of Spot date (( Aug 19) till CME’s Sep Aug 19) till CME’s Sep
2005 JYen F delivery date/32005 JYen F delivery date/3rdrd Wed of Sep 2005(9/20) is Wed of Sep 2005(9/20) is
0.35.0.35.
CME Sep 2005 JYen Futures Price would be:CME Sep 2005 JYen Futures Price would be:
110.00-0.35=109.65 and reverse it to≒0.0091449 110.00-0.35=109.65 and reverse it to≒0.0091449
⇒⇒ 91459145
the both market CME and Interbank market move the both market CME and Interbank market move
parallel each other.parallel each other.
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 25
CMECME®® FX : Spot Equivalent Pricing FX : Spot Equivalent Pricing
All CME®FX contracts are quoted USD, cents per relevant All CME®FX contracts are quoted USD, cents per relevant
currency like, Stg/Dlr, Euro/Dlr.currency like, Stg/Dlr, Euro/Dlr.
CMECME®®FX contracts is futures contracts which have fixed FX contracts is futures contracts which have fixed
maturities (delivery dates). Those are usually 3maturities (delivery dates). Those are usually 3rdrd
Wednesdays of March, June, Sep and Dec. Theoretically a Wednesdays of March, June, Sep and Dec. Theoretically a
CME FX futures contract’s price should be close, if not same CME FX futures contract’s price should be close, if not same
to interbank FWD market price with the same delivery date. to interbank FWD market price with the same delivery date.
And the two markets move parallel each other. And the two markets move parallel each other.
• On Aug. 17, 2005, if CME 2005 Sep JYen F contract is being On Aug. 17, 2005, if CME 2005 Sep JYen F contract is being
traded at 9165 and Aug 19-Sep 20 Dlr Yen Swap point is traded at 9165 and Aug 19-Sep 20 Dlr Yen Swap point is
0.35 (Yen per USD). What would be USD/Yen Spot price in 0.35 (Yen per USD). What would be USD/Yen Spot price in
the interbank market?the interbank market?
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 26
CMECME®® FX : Spot Equivalent Pricing FX : Spot Equivalent Pricing
On Aug. 17, 2005, if CME 2005 Sep JYen F contract is being On Aug. 17, 2005, if CME 2005 Sep JYen F contract is being
traded at 9165 and Aug 19-Sep 20 Dlr Yen Swap point is traded at 9165 and Aug 19-Sep 20 Dlr Yen Swap point is
0.35 (Yen per USD). What would be USD/Yen Spot price in 0.35 (Yen per USD). What would be USD/Yen Spot price in
the interbank market?the interbank market?
Reverse 9165(0.009165) to 109.11 and add 0.35 Reverse 9165(0.009165) to 109.11 and add 0.35
⇒ ⇒ Interbank Dlr/Yen should be traded at around :Interbank Dlr/Yen should be traded at around :
109.46 level109.46 level
Free URL to see real time CME FX pricesFree URL to see real time CME FX prices
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 27
www.cme.com/e-quivalents
Register your name at www.cme.com/e-quivalents to see Real Time Free CME FX prices with Spot Equivalent prices
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 28
www.cme.com/fxwww.cme.com/fx
© 2003 Chicago Mercantile Exchange Inc. All rights reserved 29
DisclaimersDisclaimers
The information within this presentation has been compiled by Chicago Mercantile Exchange Inc. (CME) for general purposes only. Although every attempt has been made to ensure the accuracy of the information, CME assumes no responsibility for any errors or omissions. Additionally, the contents of this presentation should not be considered investment advice. GLOBEX® and CME® are registered trademarks of Chicago Mercantile Exchange Inc.