Chicago Mercantile Exchange (CME) launched European-style options trading for two fx contracts last week, listing its prices on the options pricing system from SuperDerivatives.
The two moves highlighted CME's ongoing efforts to align its fx futures and options products with the OTC market.
"The reason we launched [these contracts] is that they better mirror the over the counter market for options," said Rick Sears, CME's managing director, foreign exchange products. "Now we have a product with the same risk characteristics as an exchange traded futures product but that can be used without some of the basis risk around different expirations and exercise conventions."
Under European-style rules, options holders are allowed to exercise contracts only on the date of expiration. American style options can be exercised into a futures position at any time prior to expiration.
CME...