"FX Risk Transfer" – Risk Management and Efficient Trade Execution in a Distributed Wholesale Market Structure

This makes foreign exchange an essential requirement for risk reduction (hedging) through a transfer of FX risk, and for foreign currency payments. The latter being a composite product consisting of an FX risk transfer and a payment component. Lately, this payment component has attracted considerable interest, as innovation has driven improvements to the customer experience. The wholesale FX “market” is distributed, with many trading venues and participants. Some market participants act as “market makers”, accepting risk from other participants and “warehousing” this risk while waiting for offsetting transactions. Other participants operate an “agency” model, aggregating liquidity from multiple sources to seek an instantaneous match, without intermediate warehousing. A mixture of both of these models is typically used by most liquidity providers. Market users generally access this market via intermediaries and agents such as banks and brokers. more...

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Modular Financial Technologies launches new automated FX risk management and execution solution

Modular Financial Technologies, a technology solutions provider for wholesale financial markets, launched a new automated market risk management and execution solution for Foreign Exchange (FX). This software service allows clients to benefit from the potential netting, reduced market-impact and lower execution costs of a risk warehousing solution, as well as lower operating costs.
Market participants and users have exposure to FX risk through global trade, international financial markets and foreign currency payments. The market is, therefore, used to transferring FX risk between counterparties and its participants employ a range of risk management strategies, from agency to risk warehousing. Access to the wholesale FX market has traditionally required a bespoke and costly trading infrastructure, together with risk management logic (human or automated), and analytics to make best use of the market structure. more...