VM rules sound death knell for forex swaps in Europe

Market participants claim instrument was a “mythical creature” that never really existed

forex-currencies
Absent clarification from regulators, some dealers and buy-side firms have obtained legal opinions allowing them to classify forex swaps as forwards

Dealers and buy-side firms have effectively killed off foreign exchange swaps in Europe, thanks to new rules requiring the instruments to be collateralised.

Market participants, however, argue forex swaps never really existed in the first place. “We came to realise at the end of 2016 that the forex swap is a sort of mythical creature,” says a senior manager at a UK-based currency management firm.

In essence, forex swaps consist of just two forex forwards, where parties agree to buy a currency

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