FX Swaps Regulation - White Paper - ClientKnowledge/Wall Street Systems: Regulatory Effects on FX Cash Markets: How the Banks are Preparing

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April, 2011

From the white paper:

"So far, the regulatory proposals provide a broad framework and direction for change in the FX derivatives market, but many of the details remain to be specified... Although the regulations address derivative products specifically, it is likely that the changes will be felt by every participant in the FX market. Capital requirements, changes in execution, mandatory clearing, risk mitigation processes and trade reporting requirements will inevitably result in changes to business models, affecting all aspects of the market. This paper sets out an insight into banks’ reactions to the proposed regulation and possible market changes that might arise."<ref>Regulatory Effects on FX Cash Markets: How the Banks are Preparing. ClientKnowledge. Retrieved on April 12, 2011.</ref>

Summary of findings:

  • All global banks feel the liquidity of cash FX could be affected even if it is not included in the regulation.
  • 94% of banks thought their workflows could change significantly, in such areas as personnel, FX desk operational organization, and front-and back-office technology.
  • Existing technology may need alteration to comply with regulations and the market will become more electronic, with significant potential cost implications.
  • Relationships between participants in the FX market will change.
  • All banks looking at the regulations are frustrated by the lack of practical definition.<ref>Start preparing now for regulatory change in FX, warns research paper. FX Week. Retrieved on April 12, 2011.</ref>


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