e-Forex Magazine | Marketplace | FX Counterparty Risk: Is the CCP model gaining traction?

Marketplace : FX Counterparty Risk: Is the CCP model gaining traction?

First Published in e-Forex Magazine January 2009

Frances Maguire

Frances Maguire

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.

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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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