CME Group Sees Significant Improvements in Liquidity and Execution Metrics on its EBS Market Platform in Q1 2024

CME Group recently announced significant improvements in liquidity and execution metrics on its EBS Market platform, following a series of product enhancements rolled out in Q1 2024. These updates, which include faster market data, lower minimum quote life (MQL), and granular price increments for AUD/USD and EUR/USD, have led to tighter bid-offer spreads and reduced market impact from trades.

The CME states that, “Participants now benefit from enhanced price discovery, improved pricing flexibility when placing passive orders and reduced adverse selection risk. Collectively, this has resulted in materially tighter bid-offer spreads and reduced market impact from trades, empowering the marketplace to more effectively manage risk via the primary market's firm, central limit order book.”

Key highlights observed in EUR/USD spot liquidity on EBS Market include:
 

▪️ A 30% reduction in Top of Book spreads, with the Average Top of Book standing at 0.63 pips throughout the day.

▪️ A 25% reduction in Average VWAP spread for 10m EUR/USD based on lit liquidity.

 
▪️ Improved spreads during volatile periods, such as a 17% reduction in EUR/USD median spreads over the U.S. CPI data release.*

▪️ Over 20% of EUR/USD volume now being traded on quarter and three-quarter pip increments.

 
▪️ An increase in the percentage of price points traded, from ~60% to almost 90%, following the introduction of one-fourth pip increments.

*As measured over 5 minutes post data release, comparing April vs. March 2024.

Data source: Quant analytics, CME Group
 

The introduction of quarter pips in EUR/USD has also led to lower market impact on trades done on EBS Market, as measured up to 30 seconds post-transaction. This reduction in market impact, coupled with tighter spreads and the certainty of dealing on the EBS primary market, provides significant benefits to traders.

Data source: Quant analytics, CME Group

The increased granularity of pricing has also enhanced the effectiveness of the price discretion functionality, allowing users to place unlit interest at price points within the lit market, reducing pre-trade signalling.

Looking ahead, CME Group FX plans to evaluate granular price increments for other Spot and one-month NDF pairs to further strengthen the FX primary markets. Additionally, the company is working with market participants to streamline access to its FX central limit order books across FX Spot, futures, NDFs, and options. As part of this effort, EBS Market NDFs will be consolidated into a single liquidity pool under the EBS UK MTF )operated by BrokerTec Europe Limited) by the end of the year, to promote transparency, simplicity, and liquidity consolidation in the FX marketplace.