Unlocking the full potential of FX Prime Brokerage - an industry gearing up for change

It is expected that the addition of clearing and reporting for certain FX instruments will dramatically reshape the traditional FX prime brokerage model. Frances Faulds assesses the impact of the regulatory changes and how FXPB providers are rising to the challenge.

First Published: e-Forex Magazine 51 / Features / April, 2013

On the one hand FX prime brokerage becomes more complex because of the regulatory changes and on the other hand the changes mean that the likelihood of needing to use an FX prime broker increases. As well as the new requirement for firms to connect to central counterparties (CCPs) for clearing certain instruments and trade repositories for reporting all trades, the Dodd-Frank Act and the European Market Infrastructure Regulation (EMIR) will introduce the need to manage collateral for FX trades for the first time. This means that many firms that previously were able to conduct their FX business without the need of a prime broker will now most likely need one, and as a result FX prime brokers are repackaging their services to cater for the expected new business stream. Edward Pla, Managing Director and Global Head of FX Prime Brokerage and Clearing at UBS, says that the economics of all clearing businesses, including FX prime brokerage, are becoming more challenging due to increasing costs. “FX prime...continued

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