Foreign Exchange: Time to settle those differences?

It's not a new idea, but aficionados say it was never more relevant than today. To reduce the gross settlement exposures in the $1.2 trillion a day foreign exchange market a handful of banks and brokers have been working on a new way to trade the rates without having to send over the gross amount. They just settle the difference between the spot rate at the time the transaction was agreed, and the rate at delivery.

It’s not a new idea, but aficionados say it was never more relevant than today. To reduce the gross settlement exposures in the $1.2 trillion a day foreign exchange market a handful of banks and brokers have been working on a new way to trade the rates without having to send over the gross amount. They just settle the difference between the spot rate at the time the transaction was agreed, and the rate at delivery.

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