FX Swaps Regulation - Comment Letter - World Federation of Exchanges & International Options Markets Association - June 6, 2011

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Dodd-Frank Timeline, FX Swaps Exception to Swaps Regulation, Treasury Department
Proposal Date Comment Deadline Proposed Determination Final Determination
October 28, 2010 November 29, 2010 April 29, 2011 November 16, 2012

Department of the Treasury Determination of Foreign Exchange Swaps and Forwards
June 6, 2011

Summary points from the comment letter:

  1. There are no significant differences between standardized swaps that are generally subject to the Act’s requirements, and foreign currency swaps and forwards that Treasury proposes to exempt that would justify an exemption.
  2. Although the current FX market infrastructure, CLS Bank International, appears to address adequately certain risks in the two-day foreign currency spot markets, it does not in any way address other important risks that are inherent in the foreign currency derivatives markets.
  3. Centralized clearing could address the risks that are not handled by CLS Bank International.
  4. An exemption could create a gaping regulatory loophole that could invite exploitation by market participants. It would be contrary to stated G20 and US Treasury statements that standardized OTC contracts must be moved to a safer environment, in order to reduce the risks inherent in them for financial stability.
  5. An eventual exemption should stipulate that all non-cleared contracts must be reported to a trade repository.


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