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REGULATIONS, RULES, AND GUIDELINES

Regulatory Impact on FX Clearing.

The United States and Europe have both taken steps to consider an exemption from the clearing and exchange trading requirements for certain types of Foreign Exchange transactions:

UNITED STATES

SWAP AND FORWARDS EXEMPT

On 29th April 2011 the Department of the Treasury issued a Notice of Proposed Determination for FX Swaps and Forward exempting them from the clearing and Exchange Trading requirements of Dodd Frank.

We provide global Foreign Exchange coverage across a broad range of products and currencies - including precious metals.

Entity Spot FX Swaps Forwards Options
BANKS
FINANCIALS
CORPORATES FINANCIAL HEDGING
CORPORATES COMMERCIAL HEDGING
NON-UNITED STATES

✓ In scope per current legislation
✗ Not covered
‡ Clearing and Exchange Trading requirements do not apply, although still subject to trade reporting requirements and business conduct standards Entity Type Spot FX Swaps Forwards Options



EUROPE

EXEMPTION CONSIDERED

European legislators are still debating whether or not FX traders should be included within the remit of the European Market Infrastructure Regulations.


    - Extensive The latest EMIR text differentiates FX transactions from others OTC Derivatives.

    - Identifies settlement rather than counterparty risk as the predominant risk.

    - Ask this to be taken into account when considering which classes of derivates should be mandated for central clearing.

    - Includes a second recital asking for ESMA to consider an exemption for FX Swaps and Forwards.

    - ESMA should take into account “international consensus” when deciding on clearing eligibility.


    1. Corporates hedging for commercial purposes and Non-US customers are expected to be exempted from legislation.

    2. Customers transacting entirely outside the US are subjected to regulatory clarification.

    3. Although exempt from the Clearing and Exchange Trading requirements, it is still illegal under Dood-Frank to use these instruments to evade other derivatives reforms.