Manfred Wiebogen President ACI  The Financial  Markets Association
Manfred Wiebogen President ACI The Financial Markets Association

Correcting market imbalances and minimising over-regulation

The recently announced ‘proposed determination’ by the US Treasury Department to exempt foreign exchange forwards and swaps from sweeping new derivatives rules, specified under the Dodd-Frank Act was welcomed by both financial and non-financial groups, alike. ACI regards this development as fundamental for the sustainability and effective function of stable and liquid (cash) markets.

Concerns that associated costs to introduce centralized clearing (CCP) of non derivative currency contracts may impair market participants, in particular the ‘buy side’ to preserve the ability to obtain economic pricing for currency risk management, were justified. Not to mention that CCPs would have increased concentration risks, as countless transactions would have had to settle through a few clearing houses.  Furthermore, we agree with the logic underpinning the decision by the US Treasury in recognizing the unique factors of the Foreign Exchange market and the difference between FX Forwards / Swaps and other credit derivatives. The fixed terms of physical settlement, their short term nature and well functioning settlement process, have ensured that the FX market has continued to function continuously and efficiently throughout the market turmoil of the past three years.  We all recognize and support the effective progress achieved in the elimination of Settlement Risk, which...continued

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