CME Group's role in MENA

Michel Everaert, Managing Director and Head of Europe, Middle East & Africa (EMEA) for CME Group, was interviewed by Global Investor to discuss the group's role and impact in the region. 

This article is part of the 2023 MENA Finance Guide, which can be accessed here.  

What role is CME Group playing in the Middle East and North Africa (MENA) region and what does the region mean for you? 

CME Group is a leading and diverse derivatives marketplace allowing participants in MENA to manage their risk and seek out opportunity in times of uncertainty and volatility. It is also the only exchange where you can trade every investible asset class across futures, options and over-the-counter products.

The MENA region is in a strategic location at the crossroads of Europe, Asia and Africa and is accelerating its expansion as a major hub of trade and commerce. This is why CME Group has invested heavily in the region in recent years, building its brand by educating and informing clients on new derivative products and services that can help them manage their risk exposures.

CME Group has hosted, co-hosted or presented MENA dedicated events on a regular basis, most notably its flagship annual conference, the CME Group Derivatives Day in Dubai.

What are your latest product innovations that you think would appeal for the local market participants?

CME Group has a long track record of helping investors access new markets. It is in its DNA to innovate, by bringing new products to market and widening risk management capabilities.

A recent area of focus has been developing products to help clients with their transition to the Net Zero economy by launching futures on a variety of related products.

At the forefront are Voluntary Carbon Emissions Offset markets which are futures to manage risk associated with buying and selling carbon emissions offset project certificates. Equally important for the energy transition, CME Group launched Cobalt and Lithium futures, both essential to the batteries used in electric vehicles. In equities markets, CME Group offer ESG specific versions of the S&P 500 index making it easier to meet any ESG mandates in portfolios.

Staying with equities, CME Group is the home of futures and options on the S&P, Nasdaq, Dow and Russell indices. CME Group has seen growth in options trading on those indices and has launched a large number of expiries, particularly in the short end with expiries every day of the week allowing users to finely tune their exposures.

CME Group has also innovated outside traditional finance when they launched Bitcoin futures in 2018. Since then, the group significantly extended its crypto product slate by launching a variety of related products including Ether futures and options and are now the leading regulated marketplace for Crypto futures globally.

One the biggest industry changes in years has been the transition from LIBOR to SOFR. What is the role that CME Group played?  

CME Group is the only exchange to offer euro-dollar futures, SOFR futures, SOFR swaps, term SOFR and BSBY, which together provide the market a unique set of tools to manage their US dollar interest rate risk during this critical time of rising rates.

Since the start of Libor transition, CME Group has worked tirelessly with clients, regulators, and the entire US dollar interest rate community to build the products and infrastructure needed to ensure long-term, seamless continuity of the estimated $220 trillion (£172tn) in derivatives, cash and loan market products tied to USD Libor.

The group’s work was formally recommended by the Alternative Reference Rates Committee (ARRC) selection of CME forward looking Secure Overnight Financing Rate Term Rates (Term SOFR) in July 2021. CME Term SOFR rates are the only ARRC-endorsed rates and are robust, transparent, and operationally straightforward for anyone requiring a USD term structure. Term SOFR is now referenced in over $2 trillion in loans and $414 billion in OTC derivatives.

CME Group has been active educating MENA market participants on the implications of Libor transition in general as well as facilitating access to CME Term SOFR directly via CME platforms or indirectly via ISVs.

CME Group has also formed relationships with federations and participated in industry discussions on Term SOFR applicable use cases in Shari’ah-compliant products such as sukuk al-ijara. With an estimated $2.2 trillion in the global Islamic finance industry, the transition to alternative reference rate from LIBOR across Islamic financial products is a very important topic for the MENA region in 2023.

How will Listed Derivatives evolve in MENA in coming years?  

Dubai is now the leading derivatives trading hub in the Middle East, Africa and South Asia, and CME Group has witnessed tremendous growth in the trading of their markets from the emirate.

Education is key to growing the listed derivatives industry in the region and the group, with its regional partners are dedicated to develop the understanding of listed derivatives in the local trading community with numerous education events planned for 2023.

Any final words to our audience in MENA region?  

As CME Group looks ahead, so many financial markets are in transition right now and CME Group is at the centre of helping its customers maximise the opportunities these changes present.

From the growth of newer products like SOFR and carbon emissions offsets, to the existing benchmarks products across all asset classes, to creating products for new client groups such as retail traders, CME Group is serving client needs around the clock, around the world.

CME Group’s motivation is to offer first class customer services to our clients in MENA and to introduce relevant products that meet real client needs to manage their risks across the broadest range of asset classes and time zones.