Volcker rule hits forex derivatives liquidity

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The foreign exchange derivatives market should currently be enjoying a happy time. Developing economies are moving from rescue to recovery, emerging currencies continue to make elbow room for themselves, and the new Basel III regulations leave foreign exchange relatively free of the crushing capital requirements placed on the rates and credit markets. But there are signs that all is not quite so simple in forex. Buy-side participants report that market-making banks are trimming risk appetite

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