The article last week (www.euromoneyfix.com/Article.aspx?ArticleID=2009629) about some of the practices around option expiries and abandons on the exchanges prompted a solid response from the CME. While I was talking generally about exchange-traded options, the CME points out that it launched automatic exercises for in-the-money European FX options in its liquid contracts last September and did the same for its US options at the end of February.
Talking to some option players, it is evident that this degree of automation is impossible in the OTC market because there is no common trading platform. For the moment, the CME’s option volumes are dwarfed by what occurs in the OTC and will likely remain so because of the quirkiness of its contracts. However, the exchange clearly has a lot of benefits for participants, which is reflected by the strong growth it is seeing.