By Brock Arnason  Co-Founder and Head of Product, Droit Financial Technologies LLC.
By Brock Arnason Co-Founder and Head of Product, Droit Financial Technologies LLC.

Compliant FX trading requires automated regulatory technology

Global markets for FX derivative trading have developed under lightly regulated conditions. In the wake of the 2009 G20 Pittsburgh consensus on derivatives regulation, FX markets have become subject to significant regulatory oversight in areas such as price transparency, order execution, transaction reporting, central clearing and collateral management.

First Published: e-Forex Magazine 74 / Reg Tech / December, 2016

Market participants have been slow to embrace fundamental changes to their trading processes, leaving the front office to rely on ad hoc technology solutions and their own judgment to enforce increasingly complicated trading policies and rules. The need for robust, consistent and auditable pre-trade and post-trade compliance implies a matching need for automated solutions to enable compliant trading within the new regulatory framework. PRE-TRADE COMPLIANCE It is essential to know whether a prospective trade complies with relevant regulations and internal policies prior to execution. This can be challenging to implement for high volume electronic markets, given their intrinsic need for low latency execution. Although many regulators specifically exempt liquid FX spot markets from the most onerous pre-trade controls, a host of rules apply to electronic and voice trading for the majority of traded FX derivatives. In particular, these include rules for business conduct when trading with...continued

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