Margin rules snare FX options users
US banks forced to post margin on ‘naked’ trades, with buy-side firms soon to follow
A kink in the collateral rules for non-cleared derivatives is proving costly for banks that trade foreign exchange options – and the problem is going to get worse from next September.
The rules require dealers to post margin on FX options, but not on deliverable FX forwards, which are a common hedge for options. This means dealers are unable to offset the exposures against each other to reduce their margin requirements.
“The problem with hedging your FX option exposure with a deliverable
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Derivatives
PFZW’s payout to pensioners jolts euro swap curve
Dutch retirement fund’s announcement of unexpectedly large indexation takes market by surprise
Markets Technology Awards 2024: Fixes for the ‘forgotten middle’
Vendors spy opportunity in demystifying and democratising – opening up markets and methods to new users
Bank QIS teams take zero-day options plunge
JP Morgan sees better risk/reward profile for 0DTE-based trend strategies
Three’s a crowd? Eurex and Ice battle CME for €STR trading
Chasing exchanges represent 75% of trading volume, 28% of open interest in first weeks of push
FX HedgePool launches all-to-all FX swaps matching
P2P platform starts daily matching and opens up to banks, hedge funds and ECNs
US life insurers piled into index options in Q2
Counterparty Radar: Lincoln Financial, Global Atlantic lead expansion; Goldman claims top dealer spot
Huatai launches its first Hong Kong CBBC
Two more securities houses set to follow Chinese firm into Hong Kong’s listed structured products market
PTFs loaded up on US Treasuries during SVB collapse
Treasury official says non-bank interdealer market share rose 10 percentage points in March as dealers retreated
