FXPA highlights risks of uneven oversight in global currency markets.
It calls for regulatory parity to ensure fair competition and protect FX integrity.
The Foreign
Exchange Professionals Association (FXPA) has released a white paper urging
policymakers to address regulatory disparities between regulated and
unregulated foreign exchange (FX) derivatives trading venues. The industry
group warns that the current landscape may pose risks to market integrity and
customer protection.
FXPA Calls for Regulatory
Parity in FX Derivatives Trading Venues
In
its report, the FXPA emphasizes the growing presence of unregulated FX
derivatives trading platforms competing directly with their regulated
counterparts. These unregulated venues often operate with minimal oversight,
potentially offering benefits such as higher leverage and lower fees, but at
the cost of reduced customer safeguards.
“The
longer regulatory gaps between regulated FX derivatives trading venues and
unregulated FX derivatives trading venues can be exploited, the more other FX
trading venues will seek to replicate their success,” the FXPA stated in
its white paper.
The
association highlights several key differences between regulated and
unregulated platforms. Regulated venues face higher operational costs due to
compliance requirements, including market surveillance, reporting, and investor
protection measures. They also adhere to strict rules on transparency,
conflicts of interest, and impartial access.
“The
presence of unregulated FX derivatives trading venues also introduces the
possibility of regulatory arbitrage for FX markets. These dynamics raise
concerns about fairness and market integrity around the operation of
unregulated FX derivatives trading venues,” the paper further states.
FXPA suggests
that unregulated venues may benefit from cost savings associated with
non-compliance, allowing them to offer more attractive terms to customers. This
dynamic could potentially impact market liquidity and price discovery.
The Association
calls on global regulatory bodies to evaluate the effects of unregulated FX
derivatives trading venues providing services that are typically subject to
oversight. The group recommends considering these platforms as comparable to
their regulated counterparts, regardless of how they present themselves to the
market.
“Policymakers
should take into account how the operational structures of unregulated FX
derivatives trading venues impact systemic risk management, market development,
and global competitiveness,” the white paper advises.
The
association also suggests that regulators could support regulated entities by
reducing regulatory cost burdens through normalizing standards across
jurisdictions and allowing greater equivalence for entities operating in
multiple markets.
Surge in Forex OTC Derivatives
The OTC
derivatives market saw significant expansion in 2023, with total outstanding
contracts reaching $667 trillion, an 8% increase from the previous year.
Interest rate derivatives, which grew to $530 trillion, and foreign exchange
derivatives, which rose to $118 trillion, were the main drivers of this growth.
The Bank
for International Settlements (BIS) reported a distinctive pattern in market
activity throughout the year. Notional amounts surged by 15% in the first six
months, followed by a 6% contraction in the latter half. This fluctuation
aligns with a recurring seasonal trend observed in recent years.
Despite the
overall growth in notional value, the gross market value of OTC derivatives
fell by 13% in 2023. This decline was primarily due to changes in interest rate
derivatives, which peaked in late 2022 amid rapid interest rate hikes. As
rate increases moderated in 2023, the market value of these derivatives
subsequently decreased.
The Foreign
Exchange Professionals Association (FXPA) has released a white paper urging
policymakers to address regulatory disparities between regulated and
unregulated foreign exchange (FX) derivatives trading venues. The industry
group warns that the current landscape may pose risks to market integrity and
customer protection.
FXPA Calls for Regulatory
Parity in FX Derivatives Trading Venues
In
its report, the FXPA emphasizes the growing presence of unregulated FX
derivatives trading platforms competing directly with their regulated
counterparts. These unregulated venues often operate with minimal oversight,
potentially offering benefits such as higher leverage and lower fees, but at
the cost of reduced customer safeguards.
“The
longer regulatory gaps between regulated FX derivatives trading venues and
unregulated FX derivatives trading venues can be exploited, the more other FX
trading venues will seek to replicate their success,” the FXPA stated in
its white paper.
The
association highlights several key differences between regulated and
unregulated platforms. Regulated venues face higher operational costs due to
compliance requirements, including market surveillance, reporting, and investor
protection measures. They also adhere to strict rules on transparency,
conflicts of interest, and impartial access.
“The
presence of unregulated FX derivatives trading venues also introduces the
possibility of regulatory arbitrage for FX markets. These dynamics raise
concerns about fairness and market integrity around the operation of
unregulated FX derivatives trading venues,” the paper further states.
FXPA suggests
that unregulated venues may benefit from cost savings associated with
non-compliance, allowing them to offer more attractive terms to customers. This
dynamic could potentially impact market liquidity and price discovery.
The Association
calls on global regulatory bodies to evaluate the effects of unregulated FX
derivatives trading venues providing services that are typically subject to
oversight. The group recommends considering these platforms as comparable to
their regulated counterparts, regardless of how they present themselves to the
market.
“Policymakers
should take into account how the operational structures of unregulated FX
derivatives trading venues impact systemic risk management, market development,
and global competitiveness,” the white paper advises.
The
association also suggests that regulators could support regulated entities by
reducing regulatory cost burdens through normalizing standards across
jurisdictions and allowing greater equivalence for entities operating in
multiple markets.
Surge in Forex OTC Derivatives
The OTC
derivatives market saw significant expansion in 2023, with total outstanding
contracts reaching $667 trillion, an 8% increase from the previous year.
Interest rate derivatives, which grew to $530 trillion, and foreign exchange
derivatives, which rose to $118 trillion, were the main drivers of this growth.
The Bank
for International Settlements (BIS) reported a distinctive pattern in market
activity throughout the year. Notional amounts surged by 15% in the first six
months, followed by a 6% contraction in the latter half. This fluctuation
aligns with a recurring seasonal trend observed in recent years.
Despite the
overall growth in notional value, the gross market value of OTC derivatives
fell by 13% in 2023. This decline was primarily due to changes in interest rate
derivatives, which peaked in late 2022 amid rapid interest rate hikes. As
rate increases moderated in 2023, the market value of these derivatives
subsequently decreased.
Damian's adventure with financial markets began at the Cracow University of Economics, where he obtained his MA in finance and accounting. Starting from the retail trader perspective, he collaborated with brokerage houses and financial portals in Poland as an independent editor and content manager. His adventure with Finance Magnates began in 2016, where he is working as a business intelligence analyst.
FM's Editor-in-Chief Yam Yehoshua on how the newsroom evaluates stories.
FM's Editor-in-Chief Yam Yehoshua on how the newsroom evaluates stories.
FM's Editor-in-Chief Yam Yehoshua on how the newsroom evaluates stories.
FM's Editor-in-Chief Yam Yehoshua on how the newsroom evaluates stories.
Matthew Smith, Group CEO at EC Markets, speaking at FMLS:24
Matthew Smith, Group CEO at EC Markets, speaking at FMLS:24
Matthew Smith, Group CEO at EC Markets, speaking at FMLS:24
Matthew Smith, Group CEO at EC Markets, speaking at FMLS:24
Finance Magnates Annual Awards 2024 | FM Awards 2024 Highlights
Finance Magnates Annual Awards 2024 | FM Awards 2024 Highlights
🎥Catch the best moments from the Finance Magnates Annual Awards Gala Dinner!
An evening where top names in finance came together to celebrate achievements, enjoy live music, and connect over a memorable dinner. Watch the highlights and feel the energy of our first gala in Cyprus!
Congratulations to all the winners for their dedication to excellence and leadership in the financial industry, including XM, Trading PRO, FP Markets, Deriv, FxPro, LATAM, Headway, ATFX, FBS, AMEGA, EC Markets, Axi
For more information about the 1st Finance Magnates Annual Awards, visit https://bit.ly/3Zb7wNz
#FinanceMagnatesGala #IndustryExcellence #GalaHighlights #FinanceMagnatesAnnualAwards #FinanceMagnatesAwards #CelebratingSuccess #FinanceCommunity
🎥Catch the best moments from the Finance Magnates Annual Awards Gala Dinner!
An evening where top names in finance came together to celebrate achievements, enjoy live music, and connect over a memorable dinner. Watch the highlights and feel the energy of our first gala in Cyprus!
Congratulations to all the winners for their dedication to excellence and leadership in the financial industry, including XM, Trading PRO, FP Markets, Deriv, FxPro, LATAM, Headway, ATFX, FBS, AMEGA, EC Markets, Axi
For more information about the 1st Finance Magnates Annual Awards, visit https://bit.ly/3Zb7wNz
#FinanceMagnatesGala #IndustryExcellence #GalaHighlights #FinanceMagnatesAnnualAwards #FinanceMagnatesAwards #CelebratingSuccess #FinanceCommunity
FMLS:24 | Shaping the Next Era of Financial Evolution
FMLS:24 | Shaping the Next Era of Financial Evolution
Welcome to FMLS:24 – the premier event where influential brands and leaders in trading, payments, fintech, and digital assets come together!
Join over 2,500 industry professionals, engage with 150+ expert speakers, and discover endless opportunities with 70+ top exhibitors. FMLS:24 is where senior executives and decision-makers gather to close deals, forge new partnerships, and strengthen connections with long-term clients.
Whether you’re in finance, technology, or payments, this summit is your gateway to future growth, meaningful collaborations, and industry-leading insights.
👉 Don't miss out – secure your ticket now at https://events.financemagnates.com/ZQEYy0?utm_source=youtube&utm_campaign=fmls24-awareness&utm_medium=video&RefId=MLS%3A24+Video+Promo
#fmls #fmls24 #fmevents #financemagnates #forex #payments #crypto #events #london #fintech #ai #generativeai #technology #onlinetrading #forex #investing #investors #tech
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/showcase/financemagnates-events/
👍 Facebook: https://www.facebook.com/FinanceMagnatesEvents
📸 Instagram: https://www.instagram.com/fmevents_official
🐦 Twitter: https://twitter.com/F_M_events
🎥 TikTok: https://www.tiktok.com/@fmevents_official
▶️ YouTube: https://www.youtube.com/@FinanceMagnates_official
Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!
Welcome to FMLS:24 – the premier event where influential brands and leaders in trading, payments, fintech, and digital assets come together!
Join over 2,500 industry professionals, engage with 150+ expert speakers, and discover endless opportunities with 70+ top exhibitors. FMLS:24 is where senior executives and decision-makers gather to close deals, forge new partnerships, and strengthen connections with long-term clients.
Whether you’re in finance, technology, or payments, this summit is your gateway to future growth, meaningful collaborations, and industry-leading insights.
👉 Don't miss out – secure your ticket now at https://events.financemagnates.com/ZQEYy0?utm_source=youtube&utm_campaign=fmls24-awareness&utm_medium=video&RefId=MLS%3A24+Video+Promo
#fmls #fmls24 #fmevents #financemagnates #forex #payments #crypto #events #london #fintech #ai #generativeai #technology #onlinetrading #forex #investing #investors #tech
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/showcase/financemagnates-events/
👍 Facebook: https://www.facebook.com/FinanceMagnatesEvents
📸 Instagram: https://www.instagram.com/fmevents_official
🐦 Twitter: https://twitter.com/F_M_events
🎥 TikTok: https://www.tiktok.com/@fmevents_official
▶️ YouTube: https://www.youtube.com/@FinanceMagnates_official
Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!