CME Group (NASDAQ: CME), the world’s leading and most diverse derivatives marketplace, today announced the launch of CME Bloomberg Dollar Spot Index futures. The futures contract will be available for trading on the CME Globex electronic trading platform effective April 4, 2016, pending all relevant regulatory review periods. This contract will be listed with and subject to the rules and regulations of Chicago Mercantile Exchange.
The new contract tracks the performance of a basket of 10 developed and emerging market currencies versus the U.S. dollar: Euro, Japanese Yen, Canadian Dollar, Mexican Peso, British Pound, Australian Dollar, Swiss Franc, South Korean Won, Offshore Chinese Renminbi and Brazilian Real.
“In this time of heightened geopolitical uncertainty, this contract helps meet increasing customer demand for FX products as a tool to effectively manage global risk,” said Craig LeVeille, CME Group Executive Director FX Products. “We’re pleased to collaborate with Bloomberg to offer a futures contract that provides margin offsets against our existing deeply liquid FX products and a better measure of the U.S. dollar vs. the global market.”
“Corporations, traders and investors now have a new tool to efficiently manage currency volatility,” said Alan Campbell, Bloomberg Index Product Manager. “A CME Group futures contract on the Bloomberg Dollar Spot Index will better capture the value of the U.S. dollar by using a basket of developed and emerging market currencies.”
“We believe the Bloomberg Dollar Spot Index is a representative benchmark for investors to access, trade or invest in the value of the greenback relative to major global currencies,” said Ben Slavin, WisdomTree Head of Product & Business Development. “Furthermore, we are pleased to see the launch of this CME Group futures contract, a welcome addition to accessing the tradability of an existing valuable index.”
CME Bloomberg Dollar Spot Index futures will be cash-settled to offer operational ease for clearing members and clients with a U.S. Dollar cash settlement. The underlying index and the futures contract will reconstitute annually to reflect global trading activity with the U.S. and associated global foreign exchange volume. These two factors determine the composition of the index:
- A currency’s relative weight in the global FX market as measured by the BIS Triennial Central Bank Survey; and,
- Each country’s relative importance as measured by their cross border trade with the U.S.
A BETTER MEASURE OF THE U.S. DOLLAR?
The Bloomberg Dollar Spot Index differs in many respects from the widely used ICE U.S. Dollar Index.
BBDXY tracks a more representative basket of currencies by considering global currency market liquidity and trading partners of the U.S.
BBDXY is not dominated by the euro, unlike ICE U.S. Dollar Index, and also includes major emerging market currencies such as Korean won, Mexican peso and Chinese renminbi— all major trading partners of the U.S. with increasing liquidity.
Unlike the ICE U.S. Dollar Index’s static composition, BBDXY is dynamic, with an annual rebalancing process that captures the changing state of currency markets. This results in the index that includes important currencies (like the Australian dollar) that rank higher in liquidity and trading versus the Swedish krona.
To view the official release click here.