19 December, 2019 | AtoZ Markets – CME reports that Forex Volume and open interest have reached to its records mark, which has never seen before. Moreover, the volatility of its foreign exchange markets has been in a gradual decline for years. The world’s central banks have imposed on monetary and interest rate policies. CME leaders have tried to explain these records as indications of lower prices, easier access and greater use of its tools. But observers see them as “the calm before the storm”.
Open Interest and Forex Volume Hits New Record
The derivatives exchange operator said foreign exchange futures hit a new single-day volume record of 2.7 million contracts on Wednesday last week. It broke the previous record of 2.5 million contracts that had been established on 14 June 2017.
Meanwhile, open interest in CME foreign exchange futures hit a record 2.3 million contracts on 11 December. That compared to the previous open interest record of 2.2 million contracts. Paul Houston, CME foreign exchange head said:
“Customers are increasingly accessing the high liquidity, capital and cost efficiency offered by our listed FX products to manage their FX exposure.
Record open interest, combined with our recent reductions in minimum price increments for calendar spreads in euros, yen and pounds sterling, continued to strengthen liquidity and lower trading costs during this year-end roll period “.
According to the CME, the Mexican peso and the Norwegian krone broke single-day trading volume records on 10 December. The derivative market operator also said that large open interest holders in foreign exchange futures had reached a record 1,261. An 18% year-to-date rise compared to the same period in 2018.
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Average Daily Volume
Earlier this month, CME reported 688,000 contracts in average daily volume (ADV) for November. That was down 24% from the same month of 2018. However, it highlighted the ADV of Swiss franc futures and options for the last month. That jumped 17% to 27,000 contracts compared to November 2018. The CME also highlighted an increase in the ADV for Brazilian real futures and options for the month last. It was up 224% to 14,000 contracts compared to November 2018.
NASDAQ's market analysts have drawn this rather revealing diagram. It is the close correlation between the combined volatility of its major forex currencies and current account balances since the financial crisis of 2009. It is also important to note what happened before the crisis. After the millennium crossover, the volatility of the G10 had also dropped to about the same point as it does now. From 2007 until the crisis set in, volatility peaked, a harbinger and early warning signal of something appalling on the world economic horizon.
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