From platforms to market penetration – electronic currency derivatives trading takes further steps forward

The birth of ‘standardised derivatives’ looks set to herald a new era of electronic trading for currency derivatives and as Frances Faulds finds out, it is long overdue.

On unveiling the Wall Street reform bill, CFTC chairman Gary Gensler said standardised derivatives will be required to trade on open platforms and be submitted for clearing to central counterparties sealing the future trading model for currency derivatives. The term ‘standardised derivatives’ was first used by the G20 leaders in Pittsburgh in 2009 to describe the over-the-counter derivatives that could be cleared, adding that those deemed too exotic and too illiquid to be cleared would then be subject to higher capital requirements. The upshot is that the bulk of OTC currency derivatives have become standardised, and therefore clearable, and therefore electronically tradeable. The FX industry has made several attempts in the past to trade FX options electronically in the past and they largely failed. Now however, the timing is right, and it is mandatory. Alfred Schorno “Market makers have shifted their development resources to tackle, and automate, the volumes for quotes that will...continued

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