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ACI Russia General Assembly 29 May 2014 CME GROUP – FX Futures

ACI Russia General Assembly 29 May 2014 CME GROUP – FX Futures. Danny Corrigan CEO, CME European Trade Repository. Foreign Exchange. OTC derivatives are going through a global regulatory filter. Source: Council of the EU, ESMA, BCBS, IOSCO, Oliver Wyman analysis.

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ACI Russia General Assembly 29 May 2014 CME GROUP – FX Futures

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  1. ACI Russia General Assembly29 May 2014CME GROUP – FX Futures Danny Corrigan CEO, CME European Trade Repository

  2. Foreign Exchange

  3. OTC derivatives are going through a global regulatory filter Source: Council of the EU, ESMA, BCBS, IOSCO, Oliver Wyman analysis

  4. Cost drivers vary significantly across FX models Relatively high costs Relatively low costs No/low costs

  5. Drilldown: Mixed FX portfolio Current Regulations: Multilateral netting benefits increase cost efficiency of futures and cleared OTC models Perspectives Annualized cost of €10 BN notional € MM • A central counterparty model may result in significant multilateral netting benefits for portfolios of trades1 • Risk exposure reduced and capital requirements lowered • Multilateral netting results in lower initial margin requirements • Benefits of using counterparty highlighted when considering a trading portfolio rather than a single directional trade • Cost benefits clearest for ETD model where initial margin requirements and therefore funding costs are decreased Source: Datastream, Bloomberg, CME, Oliver Wyman analysis 1. Depends on overall risk offsets; assumed 60% IM and exposure netting benefit for CCP models vs. 20% for bilateral trades Key assumptions underlying analysis: Initial margin calculated using 99% VaR methodology; assumed 5% DF/IM with 10% c-factor; EPE FX and IR methodology used for proxy factors in capital and CVA exposure calculation; 30% bilateral risk weight; 2% CCP risk weight; proxy multiplier used for CVA VaR calculation;12.5% bank capital ratio; 11% cost of capital; 1.2% funding costs;1.2% annualised CVA

  6. CME Europe Ltd • Launched April 2014 • London-based, FCA supervised RIE positioning it in Europe’s most important financial centre • Wholly owned subsidiary of CME Group with a dedicated Board of Directors and Management Team • Initially launching with 30 FX futures including USD/RUBand will become a multi-asset class exchange phased in over time • Guided by the strategic imperatives of efficiency & simplicity • Using CME Globex, the world’s leading electronic trading system, as its trading platform • CME ClearPort will be used to enter block & EFP trades, amongst others, to bring them under the rules of the exchange and for clearing • Clearing services are provided by CME Clearing Europe, a Bank of England recognised and supervised London-based clearing house

  7. fxteam@cmegroup.com Will Patrick – CME group

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