A determinations committee comprised of active market participants may be used to resolve future close-outs of foreign exchange contracts during major market disruption events.
The Global Financial Markets Association’s FX division plans to launch a consultation in January to test industry support for the idea, which could see the market adopt a similar framework to the one used for resolving credit default swaps (CDSs).
“For an agreement such as this to work, we need to have a process that market participants are comfortable with. Firstly, for determining whether or not a disruption event has taken place, and secondly, for determining how the actual close-out will take place,” says John Ball, managing director of the global FX division for Asia-Pacific at the GFMA.
One option currently being considered would see the FX…
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