Regulatory measures and real-time FX margining

Mark Biezup, FX product Manager - SunGard Sierra, outlines why recent and projected regulatory changes along with a focus on risk management will have significant implications for FX brokers.

First Published: e-Forex Magazine 38 / Viewpoint / January, 2010

The FX market has endured the financial crisis significantly better than most other asset classes. Nevertheless it has not escaped the eye of regulators. Previously FX firms have not faced many restrictions on either margining or leverage, but the FX market has grown enormously in a short time thanks to the adoption of electronic trading. Regulators are keen to ensure that adequate protection measures exist, from the day trader up to larger firms, as the market continues to grow. These changes also attempt to prevent systemic risk from seeping outside of the FX market and, by domino effect, affecting any underlying companies or retail investors.New requirements Many of these new requirements come from the US and the National Futures Association (NFA), which regulates the FX industry in the US. The NFA has proposed some specific measures regarding margining and leverage, so that both customers and brokers can reduce the risks created by rapid market fluctuations and potential liquidations. FX firms will now...continued

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