Frances Maguire
Frances Maguire

FX Counterparty Risk: Is the CCP model gaining traction?

In the midst of the world’s credit crunch the centrally cleared counterparty for FX, FXMarketSpace, closed its doors due to lack of liquidity. Frances Maguire asks why it failed to gain traction and the likelihood of another CCP coming to the fore.

First Published: e-Forex Magazine 34 / Marketplace / January, 2009

At the close of business in October 17, FXMarketSpace (FXMS), the centrally cleared global foreign exchange platform jointly developed by CME Group and Thomson Reuters, ceased trading, due to the fact that liquidity levels indicated the joint venture would fail to become profitable in 2008.  Launched in May 2006, the platform failed to gain critical mass despite being the first attempt to introduce the exchange model to spot foreign exchange. While many say that the growth of FX prime brokerage and the introduction of FX settlement by establishment of CLS negated the need for an CCP for spot FX, it is ironic that the venture closed in the middle of the financial turmoil that has put counterparty risk back in the spotlight.In a white paper published in November, The Future of OTC the Markets, Mark Yallop, group chief operating officer of ICAP says that since its launch in 2006, the Harmony FX processing network provided by Traiana has grown to process over 150,000 FX transactions daily and materially...continued

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