LCH.Clearnet and CLS are hopeful of pick-up in FX options clearing next year despite the lack of a regulatory mandate
Central clearing in foreign exchange has
proven much more complex than other asset classes. A new
service developed by LCH.Clearnet and CLS may see the first
FX options cleared in 2016 despite there being no regulatory
mandate on firms to do so, Joel Clark reports
From the advent of the single European
currency to the pegging of the Swiss franc, the foreign
exchange market has dealt with its fair share of structural
challenges over the years. Central clearing of FX options,
likely to begin in 2016, might sound like a more niche
development, but given the complexity of introducing clearing
in a physically settled market, it may be no less
Driven by the G-20 commitment in 2009
that all standardised over-the-counter derivatives should be
cleared through central counterparties (CCPs), FX clearing
has been on the radar for several years. While spot, swaps
and forwards were exempt from clearing under the US
Dodd-Frank Act, it is still widely expected that FX
non-deliverable forwards (NDFs) and options will eventually
be subject to a clearing mandate.
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