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US Treasury Exempts FX Swaps and Forwards

The US Treasury Department has issued a final determination providing that certain mandatory derivatives requirements, including central clearing and exchange trading, will not apply to FX swaps and forwards. The move was immediately welcomed by industry bodies as well as end-users of FX products. US Treasury Secretary Timothy Geithner was given the authority to decide whether FX swaps and forwards should be included in the Dodd-Frank Act. The decision, while a relief to many in the industry, was not wholly unexpected as Secretary Geithner had indicated previously that he believed the FX markets to be different (see Squawkbox, December 7, 2009). In a release, the US Treasury department states: “The FX swaps and forwards market is markedly different from other derivatives markets. Existing procedures in the FX swaps and forwards market mitigate risk and help ensure stability. While central clearing requirements will strengthen the rest of the derivatives market, the potential bene...

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