In a testament to its position as the leading derivatives marketplace, CME Group takes home no fewer than four awards this year. The firm’s breadth of expertise across major asset classes, innovative product development and unrivalled clearing operations helped it win global and regional awards as a derivatives exchange, clearing house and a weather derivatives provider.
Risk and volatility are perennial issues for market participants. The invasion of Ukraine and soaring interest rates made sure that 2022 supplied both in abundance. But CME Group prides itself on its ability to provide world-class risk management through periods of crisis and normality - from the guarantee it provides as a clearing house through to specific products and services that help individual clients.
“We’re always thinking about capital efficiencies that could help people better manage risk, whether that's from a balance sheet or cost management perspective,” says Suzanne Sprague, global head of clearing and post-trade services. “This really goes to the diversity of our products across asset classes and our ability to improve portfolio efficiencies.”
CME Group offers cutting-edge tools across interest rate futures and options that have helped customers improve portfolio performance throughout the changing rate environment. The war of Ukraine and the knock-on effect in food and energy sectors highlighted CME Group’s ability to provide peerless risk management solutions across a range of different sectors. The CME platform includes the largest array of US crude and refined products and the largest selection of agricultural products, all cleared through the same CME Clearing house.
“Our coverage across major asset classes helps us identify operational improvements,” says Derek Sammann, global head of commodities, options & international markets. “Our product teams work really hard to continue to find unique ways to provide those market leading solutions that no-one else can.”
The group prioritises close relationships with customers, which gives them an edge in designing products that solve shifting client needs. The SOFR transition is a perfect example. This has been many years in the making, but even with the final transition deadline now passed the trading environment continues to evolve. SOFR futures average daily trading volumes are now some 30% above the historical Eurodollar futures contracts. As trading activity grows, CME Group's deep expertise and long experience make it ideally placed to help reinvent one of the most important global financial markets. “What we’re excited about is that this is just the start of the SOFR story,” says Tim McCourt, global head of financial and OTC products. “We have the intellectual property, the price discovery mechanisms and the risk transfer mechanisms. This is a great opportunity for innovation and to provide even better risk management for the future.”
World-class IP is critical to CME Group’s success. Consistent enhancements have ensured a market-beating service. The firm has its own benchmark business, joint ventures with key indices providers like S&P and Dow Jones and a new partnership with Google. “The data that CME Group has through our market coverage and our strategic partnerships are a very powerful combination,” says McCourt. CME CORE - an interactive margin calculator - is available on CME products and allows clients to calculate margin capabilities on existing and hypothetical portfolios. The firm has continued to extend and scale its own front-end CME Direct, the single largest access point for customers to trade options and access cutting-edge data and market intelligence. “Whether it's client growth, trading volume or revenues, CME Direct continues to record after record in the use and growth,” says Sammann.
The quality and depth of CME Group’s operations allow it to excel in specialised as well as more mainstream products. Weather derivatives are a small part of the business in total contract terms, but an excellent example of the bespoke and innovative solutions CME Group can provide. The firm has 20 years of experience in the weather derivatives market, which is now expanding rapidly. Derivative volumes in key sites like Amsterdam, Los Angeles and New York are increasing almost exponentially. The group already trades millions of futures and options contracts across agriculture and energy. The vast majority of these clients are also exposed to weather. “Markets like weather are comparatively small and niche, but they can become an important, additive tool in portfolio risk management,” says Sammann. “The group is always thinking about the suite of products and services that we are uniquely positioned to offer our customers.”