In March 2025, CME Group will launch CME FX Spot Plus (CME FX Spot+), a new tradable FX spot instrument, leveraging CME FX Link liquidity to bring together OTC spot FX and FX futures.

CME FX Link & CME FX Spot+ will include a credit functionality that enables risk administrators to set Spot FX notional limits on entities; Spot FX Firms, Prime Clients (PC) and Trading Firms, including accounts on the following CME Group offerings:

• CME FX Link - The CME Globex spot-futures basis spread is a CME Globex spread between OTC spot FX and a related CME FX futures contract of the same currency pair. The futures leg of this spread will clear via CME Clearing exactly the same as all other futures contracts traded in CME Group markets, while the spot position resulting from transactions in the spread (that is tradable only via the spread) will be intermediated by a spot central credit counterparty that will face applicable FX Prime Broker (FXPB) of the trade counterparties.

• CME FX Spot+ (New) - All-to-all spot FX marketplace seamlessly connected to CME FX futures liquidity. CME FX Spot+ will enable spot FX market participants to tap into CME FX futures liquidity through an open, transparent central limit order book while giving FX futures users broader access to OTC liquidity. This unique liquidity connection will be made possible by implied matching through CME FX Link, a liquid, tradable spread between OTC spot FX and FX futures.

CME FX Link & CME FX Spot+ credit model on CME Globex enables the Primary FX Firm and Spot FX Firm participants to manage their exposure of the spot leg trading on CME FX Link & CME FX Spot+ through applying one-directional credit limits to their FXPBs (by the Central Prime Broker) and Trading Firm (by either the Central Prime Broker or FXPB) counterparts.

Credit limits may be set in USD Notional terms (denominated in thousands, USD equivalent) and apply to all daily trading between counterparties on CME FX Link & CME FX Spot+ trading platforms.

Contents

Revision History

Risk Model

The following diagram illustrates the CME FX Spot risk model. 

Participants

Following is a description of market participants.

Credit Entity Structure

Prime Risk administrators can create Trading Firm groups along with associating one or more Executing firms and set limits on these groups.

An Executing firm, through its Trading Firm can have one or more Prime Broker.

Credit Limit Methodologies

CME FX Link & CME FX Spot+ Credit supports long/short limits per currency pairs and Net Open Position (NOP) credit limits. Long/Short and NOP limits are both optional, independently; however, one of them must be set for trading to occur.  On entry, each order is credit checked against all applicable limits; Long/Short, NOP, or both.

On the Spot FX tab of the Entity Risk Management application, risk administrators can set a Net Open Position Limit applicable to all currency pairs and/or Max Quantity Long/Short limits for each currency pair.

Long/Short Limits per Currency Pairs

Buys and sells are summed to a net exposure value. Exposure is calculated on a per-currency pair basis. When calculating the exposure, working orders are added to the net position in the base currency of the pair to calculate an effective long or short position, as indicated below. All credit exposure values are converted to USD using conversion rates that are determined at the end of the week for the next trading week.

• Effective Long ExposureCCYpair = WorkingLongBaseCCYpair + TradedLongBaseCCYpair - TradedShortBaseCCYpair

• Effective Short ExposureCCYpair = WorkingShortBaseCCYpair + TradedShortBaseCCYpair - TradedLongBaseCCYpair
  
  

Net Open Position Credit Limit (New) 

Controls the aggregate net long and aggregate net short exposures with a counterparty.

If a NOP limit is set for the credit entity a function allows "Removing all currency pair limits". When limits are removed for currency pairs and a NOP limit is set, trading in each spot pair will ultimately be limited by the NOP limit. Additionally, a NOP limit can be set and specific currency pairs limit can be set to zero credit (blocked) or limited to the entered amount.

The quote and base currencies of the spot currency pair will be converted to US dollars based on the quantity of the outright FX Spot order, or, if the order is for the FX Link Spread, the quantity of the spread order in lots multiplied by the contract size of the related futures contract. Both the base currency and quote currency will have "pending long" or "pending short" in the NOP calculation algorithm.

Greater of Long / Short NOP Credit Calculation

Aggregate Utilization = Maximum value between [absolute value of (sum of all effective short values) and (sum of all effective long values)]; where:

• Effective Long in each currency = Maximum of (0, Net Traded +  Pending Long)

• Effective Short in each currency = Minimum of (0, Net Traded + Pending Short)

For more details, see Credit Utilization Examples below.

Suspend All New Orders

Administrative users can suspend new orders at different participant levels.

Daily Reset of Credit Utilization

Credit utilization from trades is reset at 5 pm EST. Credit utilization is recalculated based on existing working orders Good till Canceled / Good till Date (GTC/GTD) at Open. There are two cases in which a prime limit may be exceeded. 

• Working orders for a Prime Broker/Trading Firm/Account no longer have offsetting trades and a credit limit is exceeded.

• A limit is modified to less than the credit required to support positions and/or orders in the credit entity.

In both cases, existing working orders remain working in the market. An email message will be sent to the credit grantor risk admin alerting the admin of the limit breach.

Credit Utilization Examples

The below examples illustrate how NOP and currency pair credit will be used for CME FX Link & CME FX Spot+.

For these examples, assume quantities for orders/trades are expressed in 1=1000 of the base currency and credit limits are always expressed in USD where 1=1000 USD.

In these examples also assume:

Example 1 - Basic Order Scenario

In this example a firm submits orders that impacts the NOP and currency pair limits.

Precondition

Prior to order actions below, assume there are no other order actions and credit utilization is reset.

NOP Limit = 7500

Step 1 - New Order

Firm A submits a buy order of 1500 EUR/USD that remains working in the market.  Results in the following currency pair level credit impact:

Results in the following NOP credit impact:

The aggregate NOP utilization is 1650 [absolute max value of (-1650) and (1650)]. Therefore the remaining credit available for NOP is 5850 (7500 - 1650).  

Step 2 - 2nd New Order

The current available credit for NOP is 5850.  Next, Firm A submits a buy order of 2000 USD/JPY that remains working (pending long) in the market. Results in the following currency pair level credit impact:

Results in the following NOP credit impact:

The aggregate NOP utilization is 3650 [absolute max value of (-3650) and (3650)]. Therefore the remaining credit available for Firm A's NOP 3850 (7500-3650).

Step 3 - Trade

The current available credit for NOP is 3850.  Next, Firm B submits a sell order of 500 EUR/USD which partially trades against Firm A's first order in step 1. Results in the following currency pair level credit impact:

Results in the following NOP credit impact:

The aggregate NOP utilization is 3650 [absolute value (-3650) and (3650)]. Therefore the remaining credit available for NOP is 3850 (7500-3650).

Firm A's credit utilization remains unchanged. 

Example 2 - Order Exceeds the NOP Limit

In this example a firm submits orders that impact the NOP and currency pair limits.  The 2nd order exceeds the NOP and it is rejected.

Precondition

Prior to order actions below, assume there are no other order actions and credit utilization is reset.

NOP Limit = 7500

Step 1 - New Order

Firm A submits a buy order of 5500 EUR/USD.  Results in the following currency pair level credit impact:

Results in the following NOP credit impact:

The aggregate NOP utilization is 6050 [max value of (Absolute value (-6050) and (6050))]. Therefore the remaining credit available for Firm A's NOP is 1450 (7500-6050).  

Step 2 - 2nd New Order

The current available credit for the NOP limit is 1450 (7500 - 6050) .  Next, Firm A submits another buy order of 1500 EUR/USD.  That will result in the order exceeding the NOP (1500 x 1.1 = 1650>1450).  Therefore, the order is rejected. Note: this order would pass the EUR/USD long limit of 8000 (6050 + 1650 < 8000) but it is rejected due to exceeding the NOP limit.

Results in the same currency pair level credit impact:

Results in the following NOP credit impact:

The aggregate NOP utilization is 6050 [Max of (Absolute Value (-6050) and (6050))]. Therefore the remaining credit available for Firm A's NOP is 1450 (7500-6050).  

Example 3 - Order Exceeds Currency Pair Limit

In this example a firm submits orders that impact the NOP and currency pair limits.  The 2nd order exceeds the currency pair limit and it is rejected.

Precondition

Prior to order actions below, assume there are no other order actions and credit utilization is reset.

NOP Limit = 10000

Step 1 - New Order

Firm A submits a buy order of 5000 EUR/USD.  Results in the following currency pair level credit impact:

Results in the following NOP credit impact:

The aggregate NOP utilization is 5500 [Max of (absolute value (-5500) and (5500))]. Therefore the remaining credit available for Firm A's NOP is 4500 (10000 - 5500).  

Step 2 - 2nd New Order

Next, Firm A submits another buy order of 2500 EUR/USD.  That will result in the order exceeding the currency pair level credit (5500 + 2500 x 1.1 > 6000).  Therefore, the order is rejected.

User Roles and Privileges

The following user roles and privileges are supported, managing credit-granting functions for each grantor group.

Account and Entity Risk Manager

Clients can use the Account Management Service and Entity Risk Management, available from the CME Customer Center, to create accounts, set limits and manage risk settings at various levels.

To set up accounts and set limits, refer to the CME FX Link Quick Start guide.

Contact Information

For technical development support, contact Certification Support for Electronic Trading (CSET).

For production requests, please contact the Global Command Center (GCC).

For all other inquiries, please contact Global Account Management (GAM).