Reducing the risks: new perspectives on FX margin and collateral
FX margin trading and the subsequent need to manage collateral has
become very much in the spotlight in recent times as the cost of
credit becomes more prohibitive and firms seek to squeeze greater
efficiency from their bottom line.
The current turbulent trading environment has meant that more
effective risk management has become a top priority for many
banks and FX brokers, and placed collateral management at the top
of the agenda. For banks and brokers managing collateral and
margin activities in today's volatile FX trading environment, the
challenges are greater, but the benefits to be reaped in getting
it right, are also much greater.
Mike Thrower, head of sales and marketing at Cognotec, says that
what is happening within collateral management today is, to some
extent, being driven by what is going on outside credit risk and
collateral management, and in the structure of the industry. He
adds: "The market for FX brokers is consolidating quite
significantly, primarily as a result of regulatory changes in
Switzerland and the US. There is a smaller number of larger
players, with an increased focus of risk management and controls,
and on scaling the business."
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