Becoming mission critical the profound metamorphosis taking place with Post Trade FX services

Caroline Henshaw investigates how long considered simple back-office functions and post-trade processes are playing an increasingly important role in shaping global currency markets as stricter regulations and tighter margins prompt companies to streamline their workflows.

To be sure, post-trade processing is nothing new. After any trade, the buyer and the seller compare details, approve the transaction and arrange for the transfer of securities and cash. In the over-the-counter (OTC) market, which is not standardised, this process is particularly important to smooth out details.But new global regulations, particularly the Dodd-Frank Act in the US and the European Markets Infrastructure Regulation (EMIR), are creating a profound shift in how these services take place. Most importantly, they now require all trades in OTC FX and other derivative instruments to take place on regulated exchanges or swap execution facilities. Much of the push for increased trade reporting started in the wake of the financial crisis as regulators sought to increase transparency and traceability in global currency markets. Evolving technology has allowed more investors scattered around the world to start trading FX, driving rapid growth in trade volumes, fragmenting markets and making them ever harder...continued

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