Richard Willsher
Richard Willsher

2012 - OTC FX Clearing moves to centre stage

Lack of clarity about the extent of mandatory regulation for over the counter foreign exchange (OTCFX) derivatives persists but 2012 should bring greater definition and guidance to those in the market. Meanwhile, Richard Willsher reports on how exchanges, clearing houses and service providers are setting their strategies and gearing up their technology for the opportunities that may emerge.

As it stands we know that non-deliverable forwards (NDFs) and FX options will be mandated under the European Markets Infrastructure Regulation (EMIR) in Europe and the Dodd-Frank Act in the US. We also know that both pieces of regulation exclude spot FX and commercial forward transactions. Beyond that a regulatory fog descends.  “Clearing of OTCFX continues to be an evolving topic with more questions than answers at this point,” according to Chip Lowry, Chief Operating Officer at New York headquartered FX platform Currenex. “Certainly, Dodd-Frank mandates the clearing of NDFs and FX options however the timing of this requirement is still being determined.  Globally, some clearing houses already offer clearing services for NDFs but take-up has been slow.” “The US appears to be the first jurisdiction that will mandate clearing of NDFs; however the industry is still waiting for solutions to appear,” continues Lowry.  “Several important rules are...continued

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