CME Group, a diverse derivatives marketplace, has announced the launch of a new FX Options Vol Converter tool. At a time when market participants are looking for efficiencies and ways to lower their cost to trade, this new service is the first-ever tool to price CME Group’s listed FX options liquidity in over-the-counter (OTC) terms, helping foreign exchange traders to more easily monitor price relationships, make more informed decisions across markets, and ensure best execution for their trading strategies.
Forex options are derivatives based on underlying currency pairs. Trading forex options involves a wide variety of strategies available for use in forex markets. The strategy a trader may employ depends largely on the kind of option they choose and the broker or platform through which it is offered. The characteristics of options in decentralized forex markets vary much more widely than options in the more centralized exchanges of stock and futures markets. And that is something that FX Options Volatility Converter Tool wants to address.
CME Group’s listed markets have the largest central limit order book for FX options. This tool takes the extensive price data that is already functionally equivalent to OTC options, with alignments in style, expiration time, and underlying price convergence and creates a volatility grid by tenor and deltas for comparison purposes.
“Our new FX Options Vol Converter calculates and converts our listed FX options premiums, fixed strike data, rules, and formats into an OTC-equivalent volatility surface, in OTC standard tenors, deltas, and quote conventions – creating comparable pricing across major options pairs,” said Paul Houston, Managing Director, Global Head of FX products at CME Group. “Traders can quickly act upon a market opportunity with a drilldown showing the product code, reference premium price, volatility, delta and futures value to help identify their trading opportunity.”
CME Group enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data – empowering market participants worldwide to efficiently manage risk and capture opportunities. CME Group exchanges offer the widest range of global benchmark products across all major asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. The company offers futures and options on futures trading through the CME Globex® platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform. In addition, it operates one of the world’s leading central counterparty clearing providers, CME Clearing. With a range of pre- and post-trade products and services underpinning the entire lifecycle of a trade, CME Group also offers optimization and reconciliation services through TriOptima, and trade processing services through Traiana.