US foreign exchange dealers revise operational risk standards

The revised document says determination of option in-the-moneyness and the subsequent notification of counterparties should be performed by an auditable electronic system. The document goes on to say that exercising options should be “segregated from sales and trading and performed by staff that liaise between the front- and back-office personnel". The document also states that “systems should be designed to auto-exercise in-the-money transactions”.

The Foreign Exchange Committee was formed in 1978 to spread forex industry best practices to reduce costs and improve risk management. Though the New York Federal Reserve Bank sponsors the committee, it has no enforcement powers.

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