FOREX:
Options and New Clearing House Rules
The Commodity Futures Trading Commission guidelines are part of
the mandatory regulation of foreign exchange derivatives, which are
predominantly used by banks and other institutions.
With the growing debate on how to best create and execute a
viable clearing system, Forex options trading has had a huge surge of growth
and popularity. ETFs based on currencies are being introduced as well as an
alternative to trading Forex and unforeseen problems with a new clearinghouse.
Last year the new Swap Executive Facilities SEF emerged mid-year
with immediate disagreements and disorganization in several areas, as
institutions struggled to choose from a large group of SEFs and understand the
regulations in order to properly comply.
The problems with the various new SEF regulations, what types of
products and package trades had to be cleared, and the conflict of whether the
derivative product was required to be executed on a futures exchange or the SEF
led to plenty of disgruntled and confused traders and institutions.
An overall decline in activity ensued and the overall swap
derivatives market saw a drop in activity, as institutions sought out
alternative trading instruments and products that had no conflicting regulatory
elements.
With Forex facing a similar scenario this year many institutions
are already moving to alternative trading instruments and products, to avoid
the problems Forex will face as it moves through the clearinghouse regulatory
process. It is expected that this process will be far more complicated, more
confusing, with far more disagreement than the IRS and CDS regulatory
clearinghouse shift.
Institutions are moving to several different types of
instruments that are still based on foreign exchange instruments but traded on
already established exchanges, thereby alleviating the risk of the
complications of new regulations and new clearinghouse difficulties.
Article Source:
http://EzineArticles.com/8400366