A second Amicus Brief filed in the Mark Johnson appeal stresses the risks associated with providing FX services to clients around the Fix and argues that pre-hedging is intrinsic to handling orders at the mechanism.
The Amicus from Professor Torben Andersen, the Nathan S. and Mary P. Sharp Professor of Finance at the Kellogg School of Management at Northwestern University says that without the ability to pre-hedge, dealers would have no economic incentive to trade as principals with customers at the Fix.
“When dealers trade as principals at the Fix, they typically pre-hedge their trades by executing a number of smaller transactions before the Fix time,” the Amicus states.
