Exchange operator Nasdaq OMX Group Inc is considering a move to offer trading and clearing of foreign exchange, as investigations into alleged currency market manipulation boost interest in easier-to-regulate trading via exchanges, one of its executive vice presidents said. The vast majority of trading in the $5.3 trillion-a-day foreign exchange (FX) market is currently conducted between buyers and sellers dealing directly with one another, either over the phone or electronically.
But Hans-Ole Jochumsen, Nasdaq's most senior executive in Europe, said global probes into alleged FX market fixing are encouraging market participants to think about trading on exchanges and through central clearing houses, in an effort to minimise exposure to any unacceptable market behaviour.
"More and more people are talking about it being worthwhile to have products traded on a more transparent route," he told Reuters. "There are some players who are tired of being bashed by regulators and politicians all the time, so I don't think they want any more trouble."
Jochumsen said this, coupled with Basel III banking regulations that will increase capital requirements for some, typically longer-dated, foreign exchange contracts, and European Union rules on mandatory clearing of derivatives, had presented an "exciting" opportunity to expand into FX. The transatlantic exchange group is looking at offering trading and clearing of both spot FX and derivatives and will decide by the summer whether to enter the market, he said.
A move into FX would be a departure for Nasdaq, known as a mainly tech-oriented stock exchange, and would bring it into competition with the likes of CME Group Inc and IntercontinentalExchange Group Inc which already trade and clear FX futures.
Chicago-based CME, which operates the largest regulated FX marketplace in the world, said on Tuesday it would launch a derivatives market in London - where some 40 percent of all FX trades take place - in April, after receiving regulatory approval. It plans to launch with a full suite of FX futures products. Deutsche Boerse AG's Eurex Exchange will soon launch FX derivatives, according to its website.
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