FX exemption from clearing could be a mistake, says Stanford’s Duffie

It was all smiles in the foreign exchange markets last week after the US Treasury proposed exempting FX forwards and swaps from clearing and trading rules contained within the Dodd-Frank Act. But the smiles have turned to frowns this week after the industry’s success in arguing that default risk in FX markets was “relatively small” was shot down by Stanford University’s Darrell Duffie.