US exchange CME Group handled unprecedented volumes in Asia Pacific during a year of significant geopolitical events and launched new products for a number of non-mainstream currencies in the region over the last 12 months.
The exchange took home the award of International Exchange of the Year at the FOW and Global Investor Asia Capital Markets Awards following a year of growth and innovation.
Christopher Fix, managing director for Asia Pacific at CME Group, said: “As a global warehouse for risk mitigation, the Asian time zone is becoming increasingly important. If you take the example of the British EU referendum from June last year, the results came in overnight. The exchanges in Europe and the US were closed at this time. But in Singapore it was about 11:45am when the results were announced.”
The figures speak for themselves. On June 24 2016 – the day after the UK’s Brexit referendum –volumes in CME Group’s British Pound contract hit an all-time high of 522,870 lots traded.
“Around 90% of this surge in volume actually came from outside the region,” said Fix. “This highlighted the importance of the Asia time zone in the global macro hedge and this is the message we really want to emphasise to our customers.”
The 2016 US election told a similar story, with Donald Trump reportedly taking the lead in swing states around 10am Singapore time on November 9 last year – a time when the major stock exchanges on both sides of the Atlantic were closed. Global investors therefore turned to CME during Asian trading hours (defined as 8am to 8pm Singapore time) for global risk mitigation and trading opportunities.
Safe-haven metals contracts like gold and silver fared particularly well, rallying during this period of uncertainty. Volumes of 539,000 front month gold futures traded on CME during Asian hours accounted for around 70% of what was traded during the entire day. Silver, too, saw 83,000 front month futures traded during Asian hours, making up 54% of the total volume traded during that day.
“We can handle these huge volumes thrown at us,” said Fix. “We want participants to know that it’s a safe and stable market at CME Asia Pacific. We proved that with Brexit when we handled 10 million lots in Asian hours and 18 million during the most recent US election.
“Retail investors are looking for access to global markets and to do that they have to reach out to their local market and local currency,” he added, noting liquidity remained the “most important thing” for the group in the region.
“We have solidly consistent liquidity, not just at key points throughout the day – my outlook is to absolutely continue to drive this great liquidity story.”
With this in mind, the exchange has launched a number of locally relevant and innovative products across Asia over the last year as well as building on strategic cooperation and key partnerships.
Following the signing of a Letter of Intent between CME and the Taiwan Futures Exchange (TAIFEX) in March 2015, to explore the launch of US equity index-based contracts at the Asian exchange, TAIFEX launched Taiwan dollar-denominated S&P 500 and DJIA futures contracts in May 2017.
In another milestone for the CME Group in Asia, the exchange received Recognised Clearing House (RCH) status from the Monetary Authority of Singapore in May 2016.
The move gave CME Clearing, the clearing house division of Chicago Mercantile Exchange Inc, a license to sign up direct-clearing members from Singapore for clearing of both exchange-traded futures and options, as well as over-the-counter derivatives.
“We are definitely seeing interest for clearing in Singapore”, said Fix. “More and more companies are looking to take advantage of the synergies they can get.”
“Taking into account of what they’re paying to an intermediary, which could be any one of the major banks, companies want to cut out the middle man,” he added. “This is an evolution in their business and that’s going to make them much more competitive banks in the international space.”
Building on this growth in its clearing business, CME also cleared its first Korean won interest rate swaps (IRS) and Indian rupee overnight index swaps in July this year, bringing the number of clearable over-the-counter (OTC) IRS currencies offered at the US exchange to 21.
“The market is extremely excited about this. It’s a position that CME is institutionally dedicated to growing, especially in terms of currencies that may not be particularly mainstream, which our competitors don’t have but really stack up well against G10 currencies.
“We’re not looking to compete with every local exchange,” Fix concluded. “But when you have a macro global event, you really need to be looking at us. We’re a global exchange that’s locally relevant.”