CME FX Business overview ACI FX Committee Moscow Roger Rutherford – Global Head of FX Products 17...

CME FX Business overview

ACI FX Committee Moscow

Roger Rutherford – Global Head of FX Products17 March 2011

© 2011 CME Group. All rights reserved

Introduction

Roger Rutherford – Managing Director, Global Head of FX Products

• Joined CME 1st December 2010

• CLS Head of Product Management

• EBS/ICAP – Product management and Sales

• MW Marshall London and Lasser Marshall New York

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© 2011 CME Group. All rights reserved 3

Objectives

To respond to comments made in an ACI presentation at the Swiss ACI September 2010… “Exchange-trading has not historically worked for FX”

To share information on CMEs position in the global FX market

To update the committee with CMEs FX performance and growth plans

Promote closer working relationship between CME and ACI facilitating open dialogue and aligning interests


Regulatory environment

• CME does not support a global clearing mandate of OTC derivatives• CEO and Chairman on public record

• Believe in vibrant complementary cash and futures FX markets• Bespoke instruments should remain

• Believe in aligning with the OTC markets on clearing initiatives• Mandate: FX Options (working with CLS) • Desire: NDF

• Continue to monitor regulatory landscape• SDR• SEF

• CME understands the OTC “lobby” and the need for education

• Believes a thorough cost/benefit analysis is required for Dodd Frank

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CME FX - Long Term Robust Growth

Source: CME Group and ICAP Web site

• Continued outperformance versus OTC markets

• BIS Study: CME FX +97% vs OTC FX +20%

• 2010 ADV +48% vs EBS +15%

• Open Interest of 1.7m, close to all-time record

• Most global distribution of trading volumes of all CME products, with 39% of volume trading in extended trading hours

• 98% electronic overall, 65% electronic in Options


CME FX Options - Continued Outperformance2007-2010 BIS survey shows OTC FX options shrunk 2.4%, while CME grew 226% over same period

2010 FY Option ADV was $6.4 billion, an increase of 148% YoY, with 64% electronic execution.

Broad based growth across all FX pairs, with AUD +100%, GBP +138%, CAD +85%, EUR +193%, JPY +73% and CHF +38%

Open Interest is up 60% over last two years

Expansion of market maker liquidity is leading to growth in Weekly contracts and European hours, with Asian zone next target

Strong progress in electronic execution of option spreads which now account for 6.5% of total volume, up from 2% over past 6 months, through improvements in protection features (UDS logic), market maker response (RFQ) and end user education

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Drivers of CME FX growthFX as an asset class

• Benefitting from the global growth of FX – desire and need to trade FX• A greater adoption of FX Futures across all segments• Increased trading of futures in cash terms• Differentiated pool of liquidity• Diverse counterparty’s • Competitive prices/spreads • Leading edge technology and distribution (Globex)• Co-Location facilities for latency sensitive customers

Risk Mitigation• Credit risk (counterparty and country) still relevant• Alignment with other asset class futures – mutualising risk and efficiencies across products • Increase in EFP and Block activities - particularly in growth currencies

New products• E-Micros – retail size contracts• Growth currency strategies – RMB, INR, RUB• Realised Volatility Contracts

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Summary

We object to global clearing mandate to OTC derivatives

FX Futures are more relevant than ever to the FX market

We are not an alternative to CLS

We share many common concerns

OTC and Futures each benefit from each others growth

Encourage open dialogue going forward

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Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a leveraged investment, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for a futures position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one trade because they cannot expect to profit on every trade.

The Globe Logo, CME®, Chicago Mercantile Exchange®, and Globex® are trademarks of Chicago Mercantile Exchange Inc. CBOT® and the Chicago Board of Trade® are trademarks of the Board of Trade of the City of Chicago. NYMEX, New York Mercantile Exchange, and ClearPort are trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. CME Group is a trademark of CME Group Inc. All other trademarks are the property of their respective owners.

The information within this presentation has been compiled by CME Group for general purposes only. CME Group assumes no responsibility for any errors or omissions. Although every attempt has been made to ensure the accuracy of the information within this presentation, CME Group assumes no responsibility for any errors or omissions. Additionally, all examples in this presentation are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience.

All matters pertaining to rules and specifications herein are made subject to and are superseded by official CME, CBOT, NYMEX nd CME Group rules. Current rules should be consulted in all cases concerning contract specifications.

CME FX Business overview ACI FX Committee Moscow Roger Rutherford – Global Head of FX Products 17...

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