CME Broadens Currency-Trading Products to Cater Heavy Turnover Created by High-Frequency Trading

As reported by WSJ’s Jacon Bunge, CME Group Inc. is revamping its offering of renminbi futures, taking advantage of swelling demand for new ways to trade the Chinese currency and accelerating a push into international foreign-exchange markets.

In August, the CME will introduce new futures contracts on the Chinese currency, calculated in U.S. dollar terms, refreshing a push by the world’s largest futures exchange  into the world’s second-largest economy. An average $21 billion in renminbi-linked derivatives was traded per day in 2010, according to the Bank for International Settlements. Nearly all of that took place off of exchanges.

The expanded range of contracts forms the keystone of the Chicago company’s international ambitions as it tries to keep pace with rapidly consolidating rivals, moving beyond the pits trading pork bellies, wheat and corn. The shift is part of CME’s efforts to parlay its history in commodities futures into a leading role in the $4 trillion-a-day currency markets.

Futures contracts, which build in leverage, theoretically give customers a means to circumvent going to a bank for credit needed to trade in cash. Now, thanks to the heavy turnover created by high-frequency and professional traders, the business done at CME has become too big for anyone to ignore.

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