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FX Cross-rate on Currency Futures


#1

I understand that I can create a cross-rate artificially with Futures. Can you please give me a specific example of how to do that? The current FX broker I am using gives me abysmal execution on such a cross rate. Do you think that my execution performance will be better with the CME currency products?
Thank you for your help.


#2

You can do that for the liquid contracts since all are based on a USD basis. For example, if you wish to trade long GBP/JPY, you would go long the 6B contract (British Pound FUtures) and short the 6J contract (Japanese Yen Futures). The USD cancels each other out, and you are left with a 6B/6J direct rate.

The limitation behind it is that you can not place a limit order unless you are using some sort of a synthetic spreader. So for most orders, you would need to use a market order, but you could leg in possibly if you watch this closely.

I hope this address your question.

Thank you,
Matt Z
Optimus Futures
www.optimusfutures.com