FX swap margin treatment uncertain ahead of VM deadline

With one month to go, market participants are still unsure how to treat foreign exchange derivatives

Market participants wonder: is it a forward or is it a swap?

A touch of the surreal has descended upon the market for foreign exchange swaps in recent weeks, as participants ponder whether the instrument ever truly existed.

This existential angst stems from the incoming derivatives margin rules. In Europe, most counterparties will have to pay variation margin on FX swap positions from March 1. Many buy-side users, however, book the instrument as a forward – and these are being margined from the start of 2018.

A lack of guidance from regulators has led to

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