The Global Financial Crisis initiated a period of market turbulence andincreased counterparty risk for financial institutions. Even though theDodd-Frank Act is likely to exempt interbank foreign exchange tradingfrom a central counterparty mandate, market participants have the optionto trade currency futures on existing futures markets which standardizecounterparty risks. Evidence for the period 2005-11 indicates that themarket share of currency futures trading has grown relative to thepre-crisis period. This shift may be the result of a perceived increasein counterparty risk among banks, as well as changes in relative tradingcosts or changes in other institutional factors.
展开▼
