Exchange of the year: CME Group

Risk Awards 2026: Price discovery remained remarkably resilient as volumes set records

Left to right: Tim McCourt and Mike Dennis

The bond markets, in the words of US president Donald Trump, “were getting yippy” in April.

US Treasury yields swung wildly after Trump levied steep tariffs on more than 100 countries on April 2, with the benchmark 10-year note lurching from a low of 3.87% on April 4 to 4.59% on April 11. 

And yet trading in CME’s interest rate markets, the largest in the world, remained astonishingly calm through April, with all major contracts trading at their minimum price increments – half of 1/32^nd of a point, for the 10-year future – despite average daily volume (ADV) jumping 46% to a record 18.4 million contracts.

“During that high period of volatility following Liberation Day, our rates markets were always at the minimum price increment,” says Mike Dennis, global head of fixed income at CME Group. “They never widened out past the minimum. They were always liquid.”

This was true not just for benchmark contracts but also more niche products, such as invoice swap spreads – a package trade that involves buying a Treasury future and paying fixed on an equivalent interest rate swap. Hedge funds that piled into a similar trade in the over-the-counter markets – buying Treasuries against swaps – had difficulty exiting their positions when the market moved against them and dealers struggled to absorb the flows. Those that opted to trade CME’s listed contracts had a different experience. ADV in invoice swap spreads – measured in DV01, the sensitivity of a position to a one basis point change in yield – hit $15.2 billion in February, when hedge funds were piling into spread trades. Those flows reversed in April, with little to no market disruption.

When you have these market-moving events, the ability to trade and clear and manage risk across all asset classes at one venue… is something the market really appreciates

Tim McCourt, CME Group

Tim McCourt, global head of equities, FX and alternative products at CME, says the exchange group’s technology and processing systems played a big role in keeping liquidity flowing and spreads tight across the board. “What matters is how fast liquidity is being replenished, and at what price,” he says. “We have a highly resilient market from a price discovery perspective, and the ability to process all of that risk and quote traffic associated with updating bids and asks during those times when the trading range is expanding. We were very pleased with the performance on our system and our ability to enable clients to manage their risk at the most efficient price possible during that time.”

Clients attest that liquidity at CME remained resilient even during the worst of the April volatility. “CME still has the most robust liquidity out of any of the platforms,” says the head of rates trading at a large US bank. “At any given point in time, we’re hedging in the CME. It’s just a by-product of the size and price that’s available in their order book.”

Liquidity got tighter and more expensive at CME in April, he says, but market-makers were still operating and actively quoting on the exchange.

Beyond futures

CME’s performance in April also validated the group’s strategy of consolidating liquidity across asset classes and instruments where possible. ADV at BrokerTec, CME’s interdealer platform for US government debt trading, more than doubled in the week after the tariff announcement, from $106.6 billion between March 25 and April 2 to $249.2 billion from April 3 to April 11. This 134% volume increase was propped up by a high watermark day of $332 billion on April 7.

CME has continued to expand and integrate its markets. April 14 saw the launch of FXSpot+, a new central limit order book (Clob) that connects the group’s futures exchange to its OTC cash market. Prices on FXSpot+ are determined by combining a futures price with spot levels, using a technique known as implied matching. Traders can then execute the resultant spot order on FXSpot+. The new venue has already attracted nearly 50 participants, with 80% being bank desks that previously were not active in the futures market.

134%

Increase in ADV at BrokerTec in the week following Liberation Day

On the rates side, CME launched BrokerTec Chicago on October 6. The new Clob is designed for basis traders that buy Treasuries and simultaneously sell equivalent futures to capture the price difference between the instruments. The new venue, which is co-located at CME’s data centre in Chicago to reduce trading latency, saw around $3 billion of notional traded in its first month of operations.

McCourt says the sheer range of products offered by CME, and all the different ways in which they can be traded, strengthens its hand in times of stress: “When you have these market-moving events, the ability to trade and clear and manage risk across all asset classes at one venue, and then benefit from the capital efficiencies and the fact that all of those pays and collects are moving through one system at CME Group, is something the market really appreciates in those times of increased volatility and uncertainty.”   

Some of those benefits can be seen in CME’s extensive portfolio margining programme, which generates around $75 billion of savings a day for clearing members and their clients. Of this, $20 billion to $25 billion is in rates products, with $1 billion coming from CME’s cross-margining agreement with the Fixed Income Clearing Corporation, and offsets between futures and swaps cleared at CME accounting for another $8.5 billion. CME is working on expanding its cross-margining agreement with FICC to end-user clients by year-end, which would unlock even more margin savings for users.

Retail therapy

While banks and institutional investors universally praise CME’s conventional futures and options contracts, the exchange’s expanding roster of products aimed at retail investors has proven more controversial.

The push to attract retail traders began in earnest in 2019 with the launch of e-micro contracts on major stock indexes, which trade in even smaller sizes than the e-minis introduced in the late 1990s. This year, CME launched so-called spot quoted futures with even smaller sizes – the S&P contract, for instance, has a notional value equivalent to the index level – as well as micro options on cryptocurrencies XRP and Solana.

Related

How BrokerTec, MarketAxess fared during Treasury rout 

Inside the week that shook the US Treasury market 

While some remain sceptical of CME’s retail products, it’s hard to argue with their growth, with more than four billion micro contracts traded since their introduction six years ago.

McCourt says that while the micro options are geared towards retail investors, they’re starting to catch on with some institutional clients, who use them for more precise hedging.

“What’s interesting is, even though these products are designed for retail, you also have institutional users using them, and that’s because everyone can benefit from that smaller, more precise unit of risk,” he says. “If you think about an equity asset manager, they don’t need to equitise their dividend flow in a $300,000 increment with the e-mini. They could do it in $30,000 increments with micros. If you have exposure to the ag market, metals market, the equity market, crypto, you can just layer in a combination of traditional e-mini or standard size and micro size. Everyone can benefit from that ability to more precisely scale their exposure up or down.”

An executive at a large exchange-traded fund (ETF) issuer says CME continues to listen and cater to institutional clients, even as it chases retail customers. With CME facing more competition in the crypto markets from exchanges such as Coinbase, the executive says the exchange has been soliciting feedback and making changes to its futures contracts to ensure they remain attractive to ETF issuers.   

“It was nice to see them start to step up their game in terms of product innovation and getting feedback from us, particularly on the crypto side, because you’re seeing some competition there for the first time,” this person says. “We’ve identified little improvements to certain things, like the time a settlement price is set, or something like that. These are very small things, but this was in their currency futures, in their bitcoin futures. They’ve been asking: ‘How can we make these futures better?’”

CME appears undaunted by any criticism of its retail ambitions. In November, it announced a partnership with FanDuel to offer event contracts that will allow customers to bet on the price of stock indexes, commodities and cryptocurrencies and the levels of economic measures such as GDP and inflation for as little as one cent.

McCourt doesn’t rule out more product innovation before year-end. “We have a few weeks left in 2025,” he says. “We could continue some innovation.”