FX forwards users drop EU banks over margin rule

Other dealers do not have to collect margin on physically settled forwards

currency exchange board
Some fear the difference between jurisdictions will make hedging using forex derivatives less efficient

European banks are being cut from counterparty lists for some foreign clients, a result of rules that would force the dealers to collect variation margin (VM) on currency forwards. Banks in other jurisdictions will be able to continue trading the products without margin after the rules take effect in the European Union in January next year.

“What we are doing now is taking EU banks off the bank panel for our non-EU clients unless those clients want to collateralise,” says James Wood-Collins, ch

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