Traders Magazine
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The introduction of the new capital regulation, Standard Approach to Counterparty Credit Risk (SA-CCR) may affect the cost of trading certain FX products, according to Paul Houston, Global Head of FX at CME Group.
SA-CCR is moving some of the capital costs, particularly around counter-party credit risk, on to a new calculation methodology.
“The absolute effects will differ from counterparty to counterparty, but what it does do is potentially make the cost of certain FX forwards and FX swap transactions more expensive and cleared alternatives cheaper,” Houston told Traders Magazine.
Also, since the Uncleared Margin Rules (UMR) went live in 2016, only a small number of firms have been impacted by Phases 1-4. But by September 2022, an estimated 1,000+ additional entities will be subject to UMR for initial margin on FX options and NDFs, as the reduced thresholds will capture more counter-parties.
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