Heather McLean
Heather McLean

Regulation, transparency and risk: meeting the need for more flexible FX Margining configurations

Regulation, transparency and risk all combine in today’s electronic foreign exchange market to add complexity for those working in this area. With this in mind, Heather McLean takes a look at how the market is meeting the need for more flexible FX margining configurations.

The global financial system has been going through and will continue to go through significant reform, says Michael Brand, head of compliance at Boston Technologies. He remarks that the financial crisis seen worldwide has highlighted a need to reduce exposure and risk.  “As a result, margining has become increasingly crucial for managing this risk in FX. Retail and institutional FX brokers alike find themselves needing to properly monitor and control exposures associated with their customers’ positions and enhance the use of collateral and the revaluation of assets, and increase transparency with regulators and investors. One of the ways regulators have tried to reduce these risks has been to increase margin requirements in products that in the past have been highly leveraged. The use of credit and cash for margin will become a thing of the past so there is a need for flexible margining opportunities. Collateralised margin seems to be the future, though it does present some challenges in...continued

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