CME to offer OTC Forex Trading

The Chicago Mercantile Exchange and Reuters have announced that they will be offering a new electronic platform for trading the global cash forex market in a 50/50 join venture. The platform, called FXMarketSpace is set to launch in the Q1 2007.

While the forex market is the largest and most liquid financial market in the world, it has never yet been centralized on a physical location or an exchange – FXMarketSpace will create the first centrally cleared, global forex market. Trading will be offered through the CME Globex electronic trading platform – offering an anonymous central limit order book. The CME will provide their trade matching and clearing technology, while Reuters will provide the global distribution through the Reuters desktop. Currently over 100,000 forex professionals use Reuters FX products.

The backbone of the forex market is made up of a global network of dealers – largely the major commercial banks of the world, who communicate through networks and by telephone. The Interbank Market describes the marketplace that exists between the largest banks, who trade with eachother directly, via interbank brokers or through electronic brokering systems such as Electronic Brokering Services (EBS) or Reuters Dealing 3000 Spot Matching. The rates can be seen by all banks – however each bank must have an established credit relationship with another in order to trade the rates being offered. Currently, other participants in the forex market – such as online forex market makers must trade through commercial banks.

See also: Interbank Market, Reuters – FXMarketSpace, CME – FXMarketSpace, Forex Introduction