“Currency derivatives have evolved substantially since 1972, when CME revolutionized the financial world with these innovative products,” said CME Chairman Scott Gordon. “Electronic trading has played an increasingly significant role in currency trading, and CME must position itself to capitalize on this important trend.”
“Many active participants in our markets have told us clearly that they want the ability to trade our currency products electronically,” CME President and CEO Jim McNulty said. “We anticipate that, combined with the open access to our GLOBEX®2 system that we implemented last year, electronic currency futures—with the transparency, efficiency and fairness of CME markets—will attract new customers to CME currency futures markets.”
CME currency futures will trade electronically virtually around the clock, from 2:30 p.m. (Central Time) to 2:00 p.m. the following business day. (On Sundays, trading begins at 5:30 p.m.) Open outcry trading of currencies takes place from 7:20 a.m. until 2:00 p.m. Monday through Friday. Currently, currency futures trade after hours from 2:30 p.m. to 7:05 a.m. on the GLOBEX2 system.
The contract specifications for electronic currency futures will be identical to CME’s open-outcry traded currencies, making them completely fungible on a 1:1 basis with pit-traded currencies. Traders in CME’s open outcry currency pits will have access to the electronically traded versions of the contracts via GLOBEX2 terminals located throughout the trading floor and the exchange’s GALAX-C™ hand-held units which may access GLOBEX2 from the trading pits. CME will place additional GLOBEX2 workstations near the currency pits and will make GALAX-C units available to traders who request them.
Each currency contract will settle daily to the same price whether traded via open outcry or electronically.
CME trades the following currencies: Australian dollar, British pound, Brazilian real, Canadian dollar, Euro FX, French franc, Japanese Yen, Mexican peso, New Zealand dollar, Russian ruble, South African rand and Swiss franc. Cross-rate contracts traded at CME are Euro FX/British pound, Euro FX/Japanese yen and Euro FX Swiss franc. CME Deutsche mark futures have traded exclusively electronically since August 1999. In addition, CME trades E-mini Euro FX and E-mini Japanese yen futures —smaller sized electronic versions of its Euro FX and yen currency contracts, introduced in October 1999.
In November 2000, CME expanded direct electronic access for all customers to products traded on the GLOBEX2 system, removed limitations on customer access to bids and offers in GLOBEX2 products and eliminated restrictions on the number of GLOBEX2 workstations that members and customers can have. CME also introduced significant upgrades to the GLOBEX2 system in 2000 and 2001, increasing the system’s speed, functionality, reliability and capacity.
Currency futures, introduced by CME in 1972 after the collapse of the Bretton Woods agreement fixing international exchange rates, were the world’s first financial derivatives products. Trading volume in CME currencies totaled 19.3 million contracts in 2000, representing eight percent of overall CME volume. The dollar volume—or underlying value—of CME currency trading totaled $1.8 trillion last year. Overall volume in 2000 at CME’s was a record 231 million contracts valued at $155 trillion.
Chicago Mercantile Exchange Inc. (www.cme.com) is an international marketplace that brings together buyers and sellers on its trading floors and GLOBEX2 around-the-clock electronic trading system. CME offers futures contracts and options on futures primarily in four product areas: interest rates, stock indexes, foreign currencies and agricultural commodities. On Nov. 13, 2000, CME finalized its transformation into a for-profit, shareholder-owned corporation as it became the first U.S. financial exchange to demutualize by converting its membership interests into shares of common stock that can trade separately from exchange trading privileges. The exchange moves about $1 billion per day in settlement payments, manages $25 billion in collateral deposits and administers more than $1 billion of letters of credit.
