CME Quick Hits: FX, Energy, Rates, Equities, Ags, & Metals

FX

The quarterly roll period for CME FX Futures has begun this week as participants begin to shift their open interest from the expiring March front month quarterly futures contract (H3) to the deferred June quarterly futures contract (M3). FX Roll spread activity is focused in this two-week period immediately prior to the expiry date of the front month contract, with roll spread activity typically being most active in the second week of the roll period (March 6^th through the 10^th). The below headlines highlight key information on participant positioning, FX futures roll efficiency, and liquidity:

Trading activity and positioning (as of the end of February)

• Open interest in FX futures and Options at $283 billion
• Looking at the client positioning in our 3 most active FX futures contracts:
  • EUR: Buyside holding 50% of OI
  • JPY: Buyside holding: 50% of OI
  • GBP: Buyside holding: 60.2% of OI

Looking back on the June roll

• Improved roll efficiency was evidenced by increased transference of open interest across a majority of G5 pairs (+6% versus the average)
  • 84% of OI was rolled in EUR
  • 75% of OI was rolled in JPY
  • 82% of OI was rolled in GBP
  • 75% of OI was rolled in AUD
  • 82% of OI was rolled in CAD

Liquidity

• The CLOB remains the primary venue for price discovery, and risk transfer in FX Futures & Options
• The CLOB is also being strongly augmented by Block, and EFRP activity
  • Names, and contact details for Block providers can be found here

Other Tools and Resources

• The Commitment of Traders tool provides a graphical representation of CFTC data on open interest.
• The FX Pace of the Roll tool provides daily update on roll activity and progress compared to previous rolls.
• Quick reference guide for blocks and EFRPs in listed FX includes links to block rules and block market makers.
• Email alerts are available for notification of all blocks going through the listed FX market as well as an end-of-day summary containing all trades from that day.

Energy

• WTI Weekly Crude Oil Options (LO1-LO5) had a record month in both volumes, and open interest in February 2023. These options provide traders with greater flexibility for risk management by offering more frequent expirations, and more granular strike prices in quarter increments.

• Average daily volumes in February were a record 8.8K lots per day, up 19% from 2022, and average open interest was up 29% to 19.2K lots per day. These monthly records add to the recent robust activity in these options. Annual records were set in 2022 for these contracts as well, with average daily volumes over 5.8K lots per day, and average open interest above 12K lots per day.

• Learn more about WTI Crude Oil Weekly options, and other Weekly energy options here.

Rates

Rates Futures Hit Open Interest Record Amid Treasury Futures Roll

• The S. Treasury Futures quarterly roll cycle is coming to a conclusion, with more than 90% of Open Interest having rolled to the June 2023 contract as of Feb. 28th. Most notably, CME Interest Rate Futures hit an all-time Open Interest Record of 34.5 million contracts on February 23rd, demonstrating the increased need for risk management tools. As expected with this roll activity, volumes were significantly elevated with an ADV of 25.1 million contracts for CME’s Interest Rate F&O products last week.

• Participants can track Treasury roll progress using the Pace of Roll tool on the CME Website. Additional resources are also available on the delivery process and delivery options.

Equities

• New short-dated options for benchmark small-cap exposure are now live for E-mini Russell 2000 Tuesday, and Thursday options. Enjoy more versatility, and more opportunities to manage shorter-term equity market risk on the Russell 2000 Index with the E-mini Russell 2000 Tuesday and Thursday options. These new Tuesday, and Thursday-expiring contracts complement our existing suite of quarterly, end-of-month, and Monday, Wednesday, and Friday weekly E-mini Russell 2000 options.

Similar to E-mini S&P 500 and Nasdaq-100 weekly options, these short-term contracts offer more flexibility to manage risk around market-moving economic events. Fine-tune your small-cap exposure and tap into E-mini Russell 2000 futures liquidity. Learn more here.

Ags

Dairy

• CME Group offers a full suite of dairy futures and options to manage price risk and engage in price discovery, which trade nearly 24 hours a day on the CME Globex electronic platform.  All dairy futures, and options are financially settled against published USDA dairy prices, facilitating convergence of physical with the convenience of cash settlement.
• There is significant potential for growth, as the underlying physical market in the U.S. is ~$45 Billion.  Exports were valued ~$10 Billion in 2022.
• Class III Milk is by far the most liquid dairy derivative worldwide. Learn more here

Metals

Aluminum

• Aluminum futures continue to evolve and gain traction as more market participants look to add exposure to the metal commodity market. It looks as if February will set yet another record with 3.3K contracts trading on average per day, with over 2.5K contracts of avg daily open interest as of February 27.
• In addition, we are pleased to announce a new market development for Aluminum futures. Effective starting April 3, Platts will begin publishing a new daily U.S. aluminum CME-basis all-in price. The new data point will run alongside existing all-in calculations, and will provide market participants with an additional reference. Read the subscriber note.

Steel

• CME Steel is on track to hit a 7th consecutive record year with 2,546 contracts traded daily YTD (+55% YoY). Record HRC volume on 23/2/2023 at 6,536 contracts traded. February is already the record ADV month in HRC at 2,150 contracts traded through 27 Feb.

One Week CME Group Volatility Index (CVOL) Aggregate Asset Class Variance