The changing status quo among banks trading in foreign exchange swaps and forwards was one of the more dominant themes in the market over the past year.
Stricter implementation of the standardised approach to counterparty credit risk (SA–CCR) in the US compared with other jurisdictions meant the country’s banks were forced to charge wider spreads than their European and Canadian counterparts to cover the increased risk-weighted assets generated by the positions.
At one point in March last year, the difference in spreads quoted for G10 FX swaps between US and European banks was nearly 20 basis points, according to data collected by third-party transaction cost analysis provider BestX.
In such a highly competitive business, this led to a fall in market share for some US…
Read More
