John Richards was the co-ordinating designer of the original Reuters Dealing system and is now Chairman of RCP
John Richards was the co-ordinating designer of the original Reuters Dealing system and is now Chairman of RCP

Achieving STP for OTC Forex Derivatives

STP has not normally been available for Over the Counter (OTC) forex derivatives, says John Richards, who outlines the requirements to achieve and support it

First Published: e-Forex Magazine 15 / Features / July, 2004

Straight Through Processing (STP) has not normally been available for Over the Counter (OTC) forex derivatives. Its absence is of increasing importance as the forex OTC derivatives market is growing rapidly. For example, according to the Bank of International Settlements OTC forex options increased by 77% year on year in the second half of 2003 to reach a notional amount of $5.7 billion. STP can reduce risk, increase accuracy, speed the reporting of trades and ensure that trading can be audited. STP is particularly desirable for derivatives, where the greater complexity of the trades increases the chance of error if the data has to be retyped.Established Trading Systems STP requires an electronic trading system able to provide the feed of data. Three systems are predominant in interbank foreign exchange trading, and it is estimated that about two thirds of all OTC foreign exchange spot deals are now agreed using one or other of them. At present none of these systems can provide a feed of derivative...continued

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