Marketplace : FX Counterparty Risk: Is the CCP model gaining traction?
In the midst of the worlds credit crunch the centrally cleared
counterparty for FX, FXMarketSpace, closed its doors due to lack of
liquidity. Frances Maguire asks why it failed to gain traction and
the likelihood of another CCP coming to the fore.
At the close of business in October 17, FXMarketSpace (FXMS), the
centrally cleared global foreign exchange platform jointly
developed by CME Group and Thomson Reuters, ceased trading, due
to the fact that liquidity levels indicated the joint venture
would fail to become profitable in 2008.
Launched in May 2006, the platform failed to gain critical mass
despite being the first attempt to introduce the exchange model
to spot foreign exchange. While many say that the growth of FX
prime brokerage and the introduction of FX settlement by
establishment of CLS negated the need for an CCP for spot FX, it
is ironic that the venture closed in the middle of the financial
turmoil that has put counterparty risk back in the spotlight.
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