Currency Options: new dimensions to exchange-based e-trading
Frances Maguire looks at the changing landscape of e-trading in
exchange-traded currency options and what the exchanges are doing
to attract new customers and win volume from the OTC market.
The drive to trade currency options electronically has created an
arms race amongst the exchanges where cutting-edge technology is
being brought to the asset class for the first time in a bid to
build liquidity and incentivise new entrants.
Last year, the New York Board of Trade, which trades currency
futures and options in New York and Dublin, began looking for an
electronic platform and ended 2006 by agreeing to a full
acquisition by InterContentinental Exchange (ICE). The futures
contracts migrated onto the ICE electronic trading platform in
November 2007 and it has yet to be decided when, and if, currency
options will follow the same route.
ICE, an electronic energy-trading marketplace, is well versed in
successfully bringing the exchange clearing model to markets that
had previously traded over-the-counter (OTC) so it will be
interesting to see if they take up the mantle with FX options as
the exchanges chip away at the OTC market for market share.
Craig LeVeille, head of FX options at CME Group, says volume in
FX options has steadily switched from the trading floor to the
exchange's electronic trading platform, CME Globex. Electronic
volume now accounts for just less than 62% of total volume traded
in FX options. In December 2006 when CME listed the majority of
its FX options on CME Globex, only about 15% of FX options were
Magazine articles in HTML format on this website are only available to current paid subscribers so unless you are a current subscriber you will not be able to read any more of this article. However, e-Forex has now made all flash and pdf versions of the magazine freely available to registered users so you can still access and view this article in full. Please sign in above and register your contact details and then these versions of the magazine can be found here: http://www.e-forex.net/Digital+Versions.efx
If you have already registered but still cannot access these versions you may need to upgrade your existing account.Please use the link below to upgrade your account which will give you free access to these versions of the magazine.