CME Group will consolidate its two NDF liquidity pools into the EBS market by October 2024

The merger of these NDF liquidity pools is expected to significantly increase market efficiency and strengthen EBS's position as a premier source of centralized liquidity and price discovery for NDFs. The platform currently allows clients to trade Asian NDFs, Latin American NDFs and African NDFs with a one-month maturity.

CME Group has announced a significant development to its foreign exchange (FX) offering.

The consolidation of the two non-deliverable forward (NDF) liquidity pools on the EBS Market platform into a single trading venue, planned for October 2024, is subject to regulatory approval. This move is intended to create a unified global trading environment that connects market participants from different regulatory areas.

The merger of these NDF liquidity pools is expected to significantly increase market efficiency. It will also strengthen EBS's position as a premier source of centralized liquidity and price discovery for NDFs. This strategic initiative responds to the growing fragmentation and complexity of the global foreign exchange market and addresses the need for a globally accessible primary trading venue for NDFs.

EBS Market offers 1-month Asian NDFs, Latin American NDFs and African NDFs

Paul Houston, Global Head of FX Products at CME Group, noted that the combination of the two leading NDF trading platforms would improve global access for participants, increase liquidity, improve price discovery and provide operational efficiencies.

“With the continued fragmentation and increasing complexity of the global foreign exchange market, the need for a unified, globally accessible primary trading venue for NDFs has never been greater. The combination of our two leading NDF trading platforms will increase access for participants around the world while increasing liquidity, improving price discovery and increasing market operational efficiency.”

EBS Market, a pioneer in electronic NDF trading, introduced central limit order book trading for these instruments in 2007. The platform currently allows clients to trade Asian NDFs, Latin American NDFs and African NDFs with a one-month maturity and offers a comprehensive range of options for traders.

CME Group is also launching CME FX Spot+

Last week, CME Group today announced plans to launch “CME FX Spot+,” a first-of-its-kind spot foreign exchange (FX) market. This platform, which is scheduled to be tested by customers in the second half of 2024, is intended to bridge the gap between cash market participants and the company's existing FX futures liquidity.

For the first time, spot FX market participants will have the opportunity to tap the liquidity of CME FX futures in an over-the-counter (OTC) spot environment. This integration occurs in a central limit order book setting to ensure transparency. On the other hand, users of FX futures markets will benefit from expanded access to OTC FX liquidity.

CME FX Spot+ aims to leverage FX Link, a mechanism that allows a tradable spread between OTC Spot FX and CME Group's FX futures. This feature goes a long way in connecting liquidity in both trading environments.

Accessibility is a key aspect of CME FX Spot+ as it will be available via the CME Globex network. This includes existing EBS Market Globex connectivity, ensuring the global EBS Spot FX customer base can seamlessly access this new and complementary liquidity pool.

The CME FX futures and options market has seen notable growth, with the average notional daily volume increasing to $81.8 billion in 2023 compared to $76 billion in 2021. This increase suggests That more investors are turning to exchange-traded derivatives as an alternative to over-the-counter (OTC) products. This shift is, in part, to optimize funding and manage the capital impact of regulations such as SA-CCR (Standardized Approach to Counterparty Credit Risk) and UMR (Uncleared Margin Rules).

In August 2023, CME Group announced the consolidation of its various foreign exchange businesses into a single entity. This unit includes FX futures, options, cash and OTC FX businesses and is led by Paul Houston, who has extensive experience leading CME Group's futures and options business for seven years.

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