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CME Group (CME) Introduces FX Options Vol Converter Tool

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Zacks Equity Research
·4 min read
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CME Group Inc. CME 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, OTC Markets Group Inc. OTCM and Virtu Financial, Inc. VIRT, 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%.

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CME Group Inc. (CME) : Free Stock Analysis Report
MoneyGram International Inc. (MGI) : Free Stock Analysis Report
Virtu Financial, Inc. (VIRT) : Free Stock Analysis Report
OTC Markets Group Inc. (OTCM) : Free Stock Analysis Report
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