Foreign exchange
Countdown to collateralisation
One of the top concerns reflected by the buy side at the recent 5 th annual ATF Global Summit on 2 February in London was that the industry has been caught off guard by the deadline of 1 March for collateralisation of NDFs and other non-spot FX instruments . At the same time , trading desks felt that there has been a lack of support from banks . Worst-case scenario , some firms are seriously worried that the CSAs under which they interact with their brokers do not allow for variation margin , effectively meaning that the trader cannot hedge their FX trades .
Even if such obstacles can be overcome , the approaching deadline will still be a challenge for many . Some traders have speculated that there could be a delay to implementation to allow the industry more time ; however , at the time of going to press there was still no confirmation of this from the regulatory authorities . Furthermore , quite apart from the timeline , there is also concern that FX market volatility could spike in March as a large portion of the market concentrates around a handful of large brokers that are seen as safest during the transition . A related point is that there could be a liquidity squeeze at times of market volatility if the buy side hoards cash FX .