Community
So they decided to exclude FX derivatives from the requirement to clear centrally. A case study in unintended consequences?
The effect of a pair of interest rate swaps can be synthesised through a non-deliverable FX forward trade combined with a long dated cross currency swap. So if a bank chooses to trade a synthetic IR products as an FX derivative structure, they are able to completely bypass Dodd-Frank, and avoid the costs of CCP membership, margin collateral and infrastructure consequences.
So at a stroke this decision will drive interest rate swaps, the largest portion of the OTC market, out of the reaches of the legislation. Is that really what they wanted? I don't think so.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Abhinav Paliwal CEO at PayNet Systems- A Neo Banking Software Platform
12 August
Raktim Singh Senior Industry Principal at Infosys
09 August
Alex Kreger Founder & CEO at UXDA
Steve Morgan Banking Industry Market Lead at Pegasystems
08 August
Welcome to Finextra. We use cookies to help us to deliver our services. You may change your preferences at our Cookie Centre.
Please read our Privacy Policy.