Currency Futures
Currency futures are exchange traded contracts to exchange currencies at a set rate on a future date. Learn CME contract sizes, quotes, margin, rolls and uses.
Currency futures are standardised contracts to buy or sell a set amount of a currency at an agreed price on a future date, traded on regulated exchanges. The largest venue is CME Group, which lists futures on all major currencies and many emerging market currencies. Currency futures offer transparent prices, published volume, central clearing and margin efficiency. They are used by hedgers, funds and active traders as an alternative to spot forex. The comparison with spot trading is in Forex vs Futures.
Major CME currency futures#
| Contract | Symbol | Size | Tick | Tick value |
|---|---|---|---|---|
| Euro FX | 6E | €125,000 | $0.00005 per euro | $6.25 |
| Japanese yen | 6J | ¥12,500,000 | $0.0000005 per yen | $6.25 |
| British pound | 6B | £62,500 | $0.0001 per pound | $6.25 |
| Australian dollar | 6A | A$100,000 | $0.00005 | $5.00 |
| Canadian dollar | 6C | C$100,000 | $0.00005 | $5.00 |
| Swiss franc | 6S | CHF 125,000 | $0.00005 | $6.25 |
| Micro EUR/USD | M6E | €12,500 | $0.0001 | $1.25 |
Check current specifications on the exchange's website before trading. See Contract Specifications.
Quoting#
CME quotes most currency futures as US dollars per unit of the foreign currency. That matches the market convention for EUR/USD and GBP/USD, but is the inverse of USD/JPY, USD/CHF and USD/CAD.
Pricing#
Currency futures prices follow covered interest parity, like forwards: the futures price equals spot adjusted for the interest rate difference to the expiry date. A currency with lower interest rates than the dollar trades at a futures premium; one with higher rates trades at a discount. See Covered and Uncovered Interest Parity and FX Forwards and Forward Points.
Expiry and rolling#
- Quarterly cycle: March, June, September and December.
- Last trading day: for most contracts, two business days before the third Wednesday of the contract month.
- Physical delivery: of the currencies, through the clearing house. Most traders roll before expiry.
- Rolling: the calendar spread between contract months reflects the interest differential, so there is no separate daily swap charge as in spot forex. See Rolling Futures Contracts and Rollover and Swap in Forex.
Margin and leverage#
Exchange set margins depend on volatility. A Euro FX contract with notional of about $135,000 might require a few thousand dollars of margin, implying leverage similar to retail spot forex. Micro contracts make sizing easier for smaller accounts. See Futures Margin: Initial and Maintenance.
Uses#
| User | Use |
|---|---|
| Corporations | Hedge foreign revenues and costs on a regulated exchange |
| Asset managers | Hedge currency exposure of foreign portfolios |
| Speculators | Trade currency views with transparent pricing |
| Arbitrageurs | Trade futures against spot and forwards |
Data advantages#
Futures publish volume and open interest, and the CFTC's weekly Commitments of Traders report shows positioning by commercial and non commercial traders. Many FX traders watch these reports for crowded positioning, especially in the yen. See Sentiment Data and Open Interest.
Risks#
- Leverage and margin calls.
- Gaps over weekends and on central bank surprises.
- Delivery if positions are not closed or rolled.
- Inverse quotes causing direction errors in yen, franc and Canadian dollar contracts.
Frequently asked questions#
What are currency futures?#
Standardised exchange traded contracts to exchange a set amount of one currency for another at an agreed price on a future date.
How are CME currency futures quoted?#
Mostly in US dollars per unit of foreign currency, which means yen, Swiss franc and Canadian dollar futures move opposite to the usual spot quotes.
Do currency futures have rollover charges?#
No daily rollover. The interest rate difference is built into the futures price and shows up when contracts are rolled each quarter.
Next, learn the theory linking interest rates and exchange rates in Covered and Uncovered Interest Parity.
Sources#
- CME Group, FX futures
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