Thanks, yes, I am aware of that. But it is a only plan and does not yet exists. Still on paper and not a reality. It will be great if this comes to pass. If it does, some think it will be about as successful as exchange traded stock futures. I have no thoughts where it could go.
Actually, I agree with your views. As with any grand plan, entering unchartered territory, the devil's in the details... Obviously, the CME / Reuters announcement last week is a terrific, groundbreaking, long-overdue move, which can only help to clean up the industry and take it to the next level. On the other hand, the new venture will have to deal with a number of constituencies, issues and risks. Not the least of which will be taking care not to cannibalize the Merc's own lineup of currency futures. Even though, ironicaly, despite all their well-known advantages over spot forex, currency futures have barely made a dent in the global currency markets, after 34 years in existence.
Well, take the E-mini S&P which has steadily taken volume away from the S&P Bigs (pit traded), because there is a real and tangible advantage of the E-mini over the pit. The increase growth and rate of growth of Forex spot v the futures suggests that traders on the whole see a real and tangible advantage to the Spot. So whatever academic advantage the futures has over the spot, that academic advantage doesn't or hasn't translated into a tangible benefit. And I doubt it(futures) ever will considering how long both markets have been in existence.
The spot FX market is vast and serves many different participants and needs. The futures serves only the economic purpose of hedging FX exposure in the cash. The speculators, creating liquidity in the FX futures market , are the necessary players, just like they are in the physical commodity markets. The spot FX market does not need specs to function. It helps, but is not critical. Just like the corn spot market does not depend on speculative cash corn traders. (Is there such a thing?) The futures FX does not and cannot compete with a spot market. The bigger problem for the fx futures market is the expense, and often trouble, for large for large forex dealers to even use the futures contracts. There are more efficient ways to hedge large commerical exposure than going to the CME. For the smaller spec trader, though, it is still greatly more efficient and transparent over time than the FX broker catering the the retail trader. The FINEX had a scheme where you could go the the exchange and put on a futures contract at any size you needed, matching the cash. In essence it worked like the FX cash market, but cleared over an exhange. Trading was in Dublin and New York The idea was great, but never took off. Maybe it was a bit ahead of its time. The annoucement by Reuters and the CME rings of this previous attempt. It might work this time. We'll know in a few years.
It'll work right out of the gate because one of its primary functions is that of an ECN. The centralized clearing op is icing on the cake.
Centralised clearing CME and Reuters is not proven, its apparently going to be some sort of Bond that users will be required to purchase as collateral...what does that mean for the small guys ? You will probably have to be sponsored into it by one of the larger players similar to the CLS setup..and that means the same as it is now in cash spot fx ..using a primebroker... it is unlcear what sort of leverage you will get whether it will be net or gross dsl etc ...and its probably another 6 months to a year away...sounds like one of those ..'lets stall everyone looking at the competition and see if there is actually any interest in the idea' vapor ware...
One thing to remember about all of this is the fact that because futures is an exchange they actually lack anonimity...anonimity is not about hiding from the regulations..its about not providing information to the outside world on your positions or being impacted by spreading or being read ...the CME actually takes rates in from many of the banks out there and those banks usually demand user ids or client ids so they can monitor deals/flow, if they believe you are a 'scalper' or large enough to impact their bottom line then they will impact your liqudiity by spreading certain rates or ask the exchange to restrict the access from that person to their pricing...in a natural market that is absolutely rediculous....thats why we need a truly natural exchange without impact from the major banks to support it.