.jpg)
U.S. Futures Exchange (USFE) announced today that it will list foreign exchange futures contracts, with daily settlements to spot prices, that replicate spot market contracts and trade on a 23-hour basis. Six U.S. dollar pairs sized for retail customers will be offered beginning September 21.
USFE’s Spot Equivalent Future (SEF) contract design automatically allocates the cost-of-carry inherent in holding a spot position overnight via an end of day cash payment, making an SEF position economically identical to a spot position. This differs considerably from traditional FX futures contracts, which have quarterly expiries and include the cost-of-carry basis in the price of the contracts.
“Global foreign exchange trading is exploding, with the majority of business occurring in over-the-counter markets,” said Satish Nandapurkar, CEO of USFE. “At the same time, there is a growing need among retail traders for the customer protections provided by a regulated exchange. USFE’s SEF contracts offer both the familiarity of spot market trading and the transparent qualities of an exchange marketplace, combining the best of both the spot market and exchange environments.”
USFE’s six initial currency pair contracts include the U.S. dollar against the Euro, Japanese yen, British pound, Swiss franc, Canadian dollar, and Australian dollar. SEF contracts will be quoted exactly as spot prices appear in over-the-counter markets and will be sized at 50,000 units of the denominator currency.
“SEF contracts are a significant step forward for derivatives trading, providing an explicit link between the futures and spot markets,” said Mr. Nandapurkar. “USFE has worked closely with key back office vendors in a joint effort to ensure the seamless implementation of this innovative new product.”
To accommodate its new foreign exchange contracts, USFE will resume 23-hour operations on September 17.
