CME Group Inc. · NASDAQ:CME
CME — Q4 2016 Earnings Presentation
60 slides from CME's earnings presentation, November 2016
Slide 1: CME Group Customer Forum Fall 2016
CME Group Customer Forum Fall 2016 London: 1 Nov. Seoul: 10 Nov. US Webinar: 10 Nov. Tokyo: 15 Nov. © 2016 CME Group. All rights reserved.
Slide 2: Agenda
Agenda • EU & International Regulatory Update • iLink Order Entry-Related Enhancements • Market Data Changes • Additional Globex Updates • Technology Services Update • EMEA Regional Update • Quiz & Q&A © 2016 CME Group. All rights reserved. 2
Slide 3: Key EU Regulatory Reform Timelines
Key EU Regulatory Reform Timelines REMIT Wholesale energy EMIR OTC, CCPs, TRs CRD IV Basel III MAR Market Abuse MiFID II / MiFIR Markets and participants FTT Financial Transaction Tax BENCH Benchmarks CCP R&R Resolution & Recovery 2012 2013 2014 2015 2016 2017 2018 Legislative Regulatory Implementat
Slide 4: MiFID II / MiFIR – Timeline
MiFID II / MiFIR – Timeline 20 Oct’11 14 Jan’14 April-May ’16 03 Jan’18 Implementation Legislative review Regulatory process Trilogues 2011 2012 2013 2014 2015 2016 2017 2018 Oct’12 June’13 Sep’15 EP draft Council general ESMA report approach adopted Final RTS adopted published June-July 02 July ’14
Slide 5: MiFID II / MiFIR
MiFID II / MiFIR MiFID II / MiFIR is a broad regulatory reform package, the key provisions being: Transparency: Pre- and post- trade transparency requirements Algo/HFT: Regulatory controls on algorithmic trading/HFT and Market making Registration requirements: Props and Commodities firms Cle
Slide 6: MiFID II / MiFIR Pre and post-trade transparency – 'block rules'
MiFID II / MiFIR Pre and post-trade transparency – ‘block rules’ Key legislative requirements – two components: (1) a waiver regime for pre-trade transparency requirements; and (2) a deferral regime from post-trade publication requirements. Final detailed rules (RTS) - ESMA has prescribed the framew
Slide 7: MiFID II / MiFIR: Trading obligation and OTFs
MiFID II / MiFIR Trading requirements: Trading obligation and OTFs Key legislative requirements - New trading venue category (OTF) for non-equities – implications include the scope of regulation (commodities trading firms), and the use of OTFs as an execution venue for the derivatives trading obliga
Slide 8: MiFID II / MiFIR: Trading obligation and OTFs
MiFID II / MiFIR Trading requirements: Trading obligation and OTFs Key legislative requirements - Introduction of a mandatory trading obligation for certain derivatives. Implementation - Primary procedure - there will be three main cumulative criteria for ESMA to consider: Clearing obligation – wh
Slide 9: MiFID II / MiFIR: Transaction reporting requirements
MiFID II / MiFIR Transaction reporting requirements Key legislative requirements - Investment firms will be obliged to report all trades in financial instruments that are admitted to trading or traded on an EU trading venue, and those where the underlying is a basket of financial instruments traded
Slide 10: MiFID II / MiFIR: Position limits for commodity derivatives
MiFID II / MiFIR Position limits for commodity derivatives Key legislative requirements - Position limits will be applicable for commodity derivatives and serve to limit the size of net positions that can be held by a market participant in ETDs and “economically equivalent“ OTC contracts. Hedging po
Slide 11: MiFID II / MiFIR: Registration requirements
MiFID II / MiFIR Registration requirements Key legislative requirements - MiFID II amends or deletes a number of registration exemptions affecting proprietary trading firms and commodity market participants. A number of firms will become subject to increased regulatory requirements under MiFID II, i
Slide 12: Agenda
Agenda • EU & International Regulatory Update • iLink Order Entry-Related Enhancements - Security Ecosystems - iLink 3.0 - Volatility Quoted Options & Triangulation - New Market Segment in FX - Mass Quotes - In-Line Credit Controls • Market Data Changes • Additional Globex Updates • Technology Servi
Slide 13: CME Group Security Ecosystem
CME Group Security Ecosystem Security Enhancements and Requirements End of Year 2016 To deliver the best security and customer experience, all certified customer-facing applications that support human-to-machine authentication to CME Group systems will be required to support • Strong passwords (stan
Slide 14: CME Group Security Ecosystem
CME Group Security Ecosystem Security Enhancements and Requirements Targeting Mid 2017 • Expand security on iLink and Drop Copy sessions - Aimed to prevent account spoofing and repudiation without requiring full encryption - Session authentication: a digitally-signed logon request replaces session p
Slide 15: iLink 3.0
iLink 3.0 Introduction to FIX Performance (FIXP) and SBE for order entry • Improved Performance - Binary encoding of order entry business messages - New FIXP session layer to establish and maintain connectivity between customers and the exchange • Risk Mitigation - “Cancel on behalf” • Simplicity -
Slide 16: iLink 3.0
iLink 3.0 Enhancements to order entry on CME Globex • Application-level optimization • More efficient messages, focused on critical information only • Optimized business semantics • Presentation level: encoding • Simple Binary Encoding (SBE) for faster encoding/decoding • Harmonize the order entry a
Slide 17: Volatility-Quoted Options & Triangulation
Volatility-Quoted Options & Triangulation Overview Volatility-Quoted Options • Allow clients to trade an option in terms of implied volatility instead of price • Reduce execution risk with “auto-hedge” into the corresponding underlying futures • Participants exchange an option in premium and a delta
Slide 18: New Market Segment (MS) for FX Markets
New Market Segment (MS) for FX Markets Consolidate the VQO, PQO, and Futures FX books on a single MS for Triangulation • Customer Impacts: - Permission your firewalls and update your order routing config - Connect to new MSGW IPs to trade via MSGW sessions - Permission your firewalls – New source IP
Slide 19: Launch Schedule for VQO and Triangulation
Launch Schedule for VQO and Triangulation • Volatility-Quoted Options in New Release Available Now • Volatility-Quoted Options in Production Nov 13, • Mock trading session: Saturday Nov 12 2016 • Triangulation in New Release Q1 2017 • Triangulation in Production Q2 2017 © 2016 CME Group. All rights
Slide 20: Mass Quote Changes Review
Mass Quote Changes Review Reduce operational overhead and improve Customer Experience in options Market Making • February 2016 Enhancements - Number of quote sets and quote entries reduced to 15 to ensure most efficient message construction and handling - Mass Quote Protections interval reduced to 1
Slide 21: In-Line Credit Controls (ICC)
In-Line Credit Controls (ICC) New Pre-Trade risk tool which will allow for daily quantity position limits, per product, at the Executing Firm + account level • More granular limits than Globex Credit Controls (GC2) • Long and short position limits can be set on future and option products separately
Slide 22: In-Line Credit Controls (ICC)
In-Line Credit Controls (ICC) Where Basis Level Scope ICC In-band Position- Firm Each product Based +account tracked +product separately +side GC2 Out-of-band Net Dollar Executing CME Globex- Value Firm wide © 2013 CME Group. All rights reserved. 22
Slide 23: © 2013 CME Group. All rights reserved.
© 2013 CME Group. All rights reserved. 23
Slide 24: Agenda
Agenda • EU & International Regulatory Update • iLink Order Entry-Related Enhancements • Market Data Changes - Steamlined SBE - Market by Order - Trade Summary - BitCoin • Additional Globex Updates • Technology Services Update • EMEA Regional Update • Product Updates • Quiz & Q&A © 2016 CME Group. A
Slide 25: Streamlined FIX/FAST Migration to Streamlined SBE
Streamlined FIX/FAST Migration to Streamlined SBE Simple Binary Encoding (SBE) - Market Data • Streamlined FIX/FAST market data is a dedicated set of data feeds of non-Globex Market Data which include: - Block Trades - Equity Indices (e.g., S&P, Dow Jones, Bloomberg) - Eris Exchange products - OTC D
Slide 26: Streamlined FIX/FAST Migration to Streamlined SBE
Streamlined FIX/FAST Migration to Streamlined SBE • Customer impacts - Mandatory certification per feed to consume streamlined SBE in production - New schema and new SBE messaging - Client system impact document available on cmegroup.com - Rolling migration, starting with Block Trade data feeds - St
Slide 27: Market By Order Market Data
Market By Order Market Data CME Globex Market By Order (MBO) will provide: • Individual queue position; size of individual orders at a price • Full depth of book • Increased confidence in execution by improved transparency into detailed book composition • Maintains anonymity MBO and Market By Price
Slide 28: Market By Price vs. Market By Order
Market By Price vs. Market By Order CME Globex current MBP solution offers price, quantity at the price, and the number of orders in the quantity best 10 price levels quantity Market By Price bids asks price MBO shows individual order sizes that make up the total quantity at a price, including their
Slide 29: Market By Order Market Data
Market By Order Market Data • No change to Presentation (SBE), Session, Transport, or Network layers • Sequencing by order priority - No book management instructions in the market data feed - Book is built on receipt by sorting by price and then order priority - No change in market data based on mat
Slide 30: MBO Implementation on CME Direct
MBO Implementation on CME Direct In CME Direct, in addition to the usual Bid and Quantity columns, there will be Order Priority (number of orders ahead of you) and Quantity Priority (number of contracts ahead of you). Displayed market depth will not change. © 2016 CME Group. All rights reserved. 30
Slide 31: Market By Order Market Data rollout
Market By Order Market Data • Client Impact Document & New Release Available Now • Phased Production Rollout by DCM in Q4 2016: Q2 2017 • CME Europe, NYMEX, COMEX and DME: December 4 – January 22 – Mock: November 12 • CBOT and MGEX: March 26 – April 9 – Mock: March 11 • CME: May 7 – May 21 – Mock: A
Slide 32: Trade Summary OrderID Opt-in Update
Trade Summary OrderID Opt-in Update Globex • To increase market transparency and simplify iLink messaging, beginning Dec 4, all tag 37- OrderID values will be published in the Market Data Incremental Refresh Trade Summary messages • iLink will no longer support FIX tag 1091-PreTradeAnonymity. CME Gl
Slide 33: Bitcoin Pricing Data via Streamlined SBE
Bitcoin Pricing Data via Streamlined SBE CME Group and Crypto Facilities will launch two Bitcoin pricing products - A reliable reference rate price source for digital assets - CME CF Bitcoin Reference Rate (BRR) aggregates the trade flow of major Bitcoin spot exchanges during a specific calculation
Slide 34: Agenda
Agenda • EU & International Regulatory Update • iLink Order Entry-Related Enhancements • Market Data Changes • Additional Globex Updates - Data API - Energy & Metals - Global Partnerships - Global Repository Services - Customer Experience • Technology Services Update • EMEA Regional Update • Product
Slide 35: Referential Data API
Referential Data API Q1 2017 Launch • Real-time insight into product and instrument information to support - Simplified Cross-Exchange Risk Management - Product risk, audit and reconciliation applications • All CME Group-cleared products included • Cloud-hosted machine-readable Json RESTful Service
Slide 36: CME Globex Enhancements for Energy & Metals Products
CME Globex Enhancements for Energy & Metals Products Related to NYMEX Floor Close October 2016 launch • Expanded User-Defined option outright instruments (UDI) to meet any trader’s needs • Create a strike for a maturity up to 19 years out • Create the first strike for a listed underlying futures ins
Slide 37: Global Partner Updates
Global Partner Updates Dubai Mercantile Exchange • July 1st successfully auctioned Oman Crude Oil with the first ever Middle East Spot Commodity Auction system • September 18th, launched Singapore vs. Middle East 180 & 380cst Fuel Oil spread futures to expand upon their May 16th Fujairah Fuel Oil pr
Slide 38: Global Repository Services
Global Repository Services Expanding into Singapore in 2017 Currently exploring MiFID & SFTR solution Total GRS volumes of new trades have hit 1 Billion Over 1500 global customers across all segments Vendor incentive program Global reporting solution for OTC cleared and un-cleared, as well as Future
Slide 39: Invested in Improving Customer Experience
Invested in Improving Customer Experience Understanding your business needs and • Adopted user-centered design, a process to gather customer input on tools providing value in and technology, to ensure what we build meets your needs every interaction • Launched a suite of self-service tools to make i
Slide 40: What's next
What’s next • Deliver clearing member firm back office fee reconciliation process efficiency through the Duco Fee Data Control and Reconciliation Service - Duco Cube allows non-IT users to load data sets and perform comparisons to quickly and easily find discrepancies between exchange and back offic
Slide 41: Agenda
Agenda • Regulatory Updates • iLink Order Entry-Related Enhancements • Market Data Changes • Other Globex Updates • Technology Services Update - DataMine - CME Direct - Market by Mobile - STP - Trade View - ClearPort • EMEA Regional Update • Quiz & Q&A © 2016 CME Group. All rights reserved. 41
Slide 42: CME DataMine Portal
CME DataMine Portal Launched October 20th (powered by TickSmith) Cloud based, online self-service portal for searching, ordering and delivering historical market data electronically Roadmap highlights include API query tool, order book replay, integration with 3rd party datasets and much more…
Slide 43: CME Direct: Futures, Options, OTC Markets on a Single Platform
CME Direct: Futures, Options, OTC Markets on a Single Platform • Real-time streaming quotes with market depth • Globex RFQs, option strategy creation, including • Multiple order types, order duration and order protection covered and multi-leg functions • Real-time option volatility surfaces and opti
Slide 44: Moving Markets by Mobile (Sneak Peak)
Moving Markets by Mobile (Sneak Peak) 44 © 2016 CME Group.
Slide 45: Benefits of CME STP
Benefits of CME STP Capture your Cleared Trades Data directly into your risk system • Direct Feed , as no cost, from Exchange to customers • Customers do not have to rely on FCM for data, one source for all exchange transactions • STP for all cleared trades regardless of venue, exchange, front end •
Slide 46: CME Trade View – Coming Soon
CME Trade View – Coming Soon Allows a firm to view its Globex, ClearPort, broker bilateral and cleared elsewhere trades © 2016 CME Group. All rights reserved. 46
Slide 47: CME ClearPort Tiered Credit
CME ClearPort Tiered Credit Non-member Broker Intermediary account structure provided non-clearing FCMs the ability to establish trading accounts for their individual customers and manage risk on the individual customer level, while preserving customer anonymity from their clearing FCM • Clearing Fi
Slide 48: Agenda
Agenda • EU & International Regulatory Update • iLink Order Entry-Related Enhancements • Market Data Changes • Additional Globex Updates • Technology Services Update • EMEA Regional Update - FX products - EU Wheat - Alumina & Cash Settled Precious Metals Ratio and Spread Futures - CME Europe • Quiz
Slide 49: Record levels of large open interest holders in FX
Record levels of large open interest holders in FX © 2016 CME Group. All rights reserved. 49
Slide 50: CME FX Futures Product Developments - CME Inc.
CME FX Futures Product Developments - CME Inc. Volatility-Quoted FX Options - Nov 13, 2016 OTC FX Options Clearing – Q2 2017 • Easy for OTC participants to trade CME FX products in a • With the support of dealer the US Clearing House is delta neutral way. looking to deploy a cash settled clearing in
Slide 51: Volatility-Quoted Options & Triangulation
Volatility-Quoted Options & Triangulation cmegroup.com/vqo © 2016 CME Group. All rights reserved. 51
Slide 52: CME Inc. Continued…
CME Inc. Continued… Conversion of American-Style FX Options to European Style This continues on a roll off roll on basis, new codes for the European style options available. Bloomberg Dollar Index Futures CME is partnering with Bloomberg to launch a Futures contract based on the Bloomberg Dollar Spo
Slide 53: OTC initiatives
OTC initiatives OTC FX Clearing Live – 12 NDF pairs: USD/BRL, USD/CLP, USD/CNY, USD/COP, USD/IDR, USD/INR, USD/KRW, USD/MYR, USD/PEN, USD/PHP , USD/RUB, USD/TWD - Full EMTA Template adherence, including primary, secondary and additional fallbacks, in both OTC cleared and CME NDF futures - HVAR margi
Slide 54: EU Wheat
EU Wheat Effective and efficient risk management solutions for participants in the European wheat marketplace • ADV of 1329 • OI over 3000 lots as per mid October • OI out as far as Dec 2017 • 7% market-share of European wheat futures market • Clients from UK, Germany, France, Singapore, Holland, No
Slide 55: Alumina Futures – Launch date 26 September
Alumina Futures – Launch date 26 September • Alumina FOB Australia (Metal Bulletin) Futures (ALB) Contracts • Alumina FOB Australia (Platts) Futures (ALA) Rulebook Chapters • COMEX 196 (ALB) and COMEX 195 (ALA) Settlement Method • Financially Settled Price Quotation • U.S. Dollars and Cents per MT C
Slide 56: Cash Settled Precious Metals Ratio and Spread Futures
Cash Settled Precious Metals Ratio and Spread Futures Launch Date October 23rd Benefits • Cash settled • True intraday price and spread transparency Gold/Silver Ratio Futures across the futures curve - A financially settled product that will provide new trading • Security through centralized clearin
Slide 57: CME Europe FX Major liquidity
CME Europe FX Major liquidity CME Europe FX Volume 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 201510 201511 201512 201601 201602 201603 201604 201605 201606 201607 201608 201609 AUD EUS GBP JPY 57 © 2016 CME Group. All rights reserved.
Slide 58: CME Europe TME Monthly Volume and Open Interest
CME Europe TME Monthly Volume 0 10,000 15,000 20,000 25,000 5,000 01/10/2015 05/10/2015 09/10/2015 13/10/2015 17/10/2015 21/10/2015 25/10/2015 29/10/2015 02/11/2015 06/11/2015 10/11/2015 14/11/2015 18/11/2015 22/11/2015 26/11/2015 30/11/2015 04/12/2015 08/12/2015 12/12/2015 16/12/2015 20/12/2015 24/
Slide 59: Agenda
Agenda • EU & International Regulatory Update • iLink Order Entry-Related Enhancements • Market Data Changes • Additional Globex Updates • Technology Services Update • EMEA Regional Update • Quiz & Q&A © 2016 CME Group. All rights reserved. 59
Slide 60: Disclaimer
Disclaimer “CME Group”, “CME Europe” and “CME Clearing Europe” are brands of CME Group Inc. and its subsidiaries, members of which include Chicago Mercantile Exchange Inc., CME Europe Limited, CME Clearing Europe Limited and CME Marketing Europe Limited. Exchange traded and Over-The-Counter (OTC) de