CME: CFTC OKs clearing move to Google Cloud

Chicago-based futures and options exchange CME Group has been approved by the Commodity Futures Trading Commission (CFTC) to run its clearing infrastructure in the cloud, following the exchange’s joint announcement with Google in June, which revealed plans to build a new private cloud region and co-location facility in Aurora, Illinois.

Speaking on the group’s Q2 earnings call, Ken Vroman, CME Group’s chief transformation officer, said the exchange expects to be running clearing cycles in the cloud “shortly.” Vroman added that the CME is about two-thirds of the way through the migration of other non–ultra-low-latency applications to the cloud. The exchange notified the CFTC in June that it intended to move its clearing and settlement infrastructure to the Google Cloud Platform (GCP).

This is a one-of-a-kind, purpose-built-for-CME facility that will provide scale and resiliency to our customer base, at the same time allowing markets to operate in the cloud—not next to the cloud, in the cloud

Ken Vroman, CME Group

The first batch of applications migrated to the platform in 2022, but these did not support core clearing or settlement activities. For example, in 2022, CME launched the Referential Data Warehouse, which provides access to historical, publicly available product information at GCP. “In 2023, CME has continued to prepare for the migration, by deploying systems to the Platform not for production purposes, but for quality assurance and testing. This early work has laid the foundation for CME to prepare for the migration of its core clearing and settlement applications to the Platform for production,” the CME wrote in its notification to the CFTC.

The filing also indicates that the exchange expects to migrate all its clearing systems by the end of 2024.

CME previously stated its intent to migrate its markets to the cloud, a goal shared by other exchanges, such as Nasdaq, which has completed the moves of both its MRX options market and Nasdaq Bond Exchange to Amazon Web Services’ cloud.

“This is a one-of-a-kind, purpose-built-for-CME facility that will provide scale and resiliency to our customer base, at the same time allowing markets to operate in the cloud—not next to the cloud, in the cloud—and we think there’s an innovative amount of engineering that went into delivering ultra-low-latency capabilities in the cloud that will allow our customers to take advantage of that,” Vroman said on the earnings call.

Extended partnership

Vroman also said that the CME has extended its partnership with Google, originally inked for 10 years in 2021, to now expire in 2037 at the earliest, which he said should give the exchange “plenty of time” to develop new capabilities, products, and services.

Last year, CME and the Depository Trust and Clearing Corp. (DTCC) also received approval from the CFTC and the Securities and Exchange Commission (SEC) for their enhanced cross-margining arrangement, which launched in January. The arrangement enables capital efficiencies for clearing members that trade and clear both US Treasury securities and CME Group Interest Rate futures by allowing those eligible to cross-margin an expanded suite of products, including CME Group SOFR futures, Ultra 10-Year US Treasury Note futures and Ultra US Treasury Bond futures, with FICC-cleared US Treasury notes and bonds.

CME Group chief information officer Sunil Cutinho said on the call that there are currently 10 clearing participants taking advantage of the offering, with “a few more” in the pipeline to be onboarded shortly. He added that the exchange is exploring ways to provide efficiencies to indirect participants but that any solutions would require another regulatory approval.

As it makes headway on its cloud plans, CME Group also intends to make Google’s AI tools available to its clients through the partnership. Vroman declined to name specific use-cases or the types of participants it would target with the offerings, but he said that data and analytics generally would be a focus in a way that hopefully enables and adds to clients’ risk management and trading strategies.