FX infrastructure providers brace for possible Greek spasm
Greece's fate will be determined in few days, as Monday failed to bring any constructive solution to break the impasse between Greece and its creditors.
In the meantime, the global currency-trading infrastructure prepares for any possible outcome the Greek standoff may bring.
“I see no reason why FX infrastructure providers, not just ourselves, but the trading platforms as well, should not be able to handle that added volatility,” said Dino Kos, the head of global regulatory affairs at CLS Group Holdings AG.
However, he added that the system should be prepared for all eventualities. “We are certainly doing so at CLS.”
The world's forex infrastructure has already gone through one major test earlier this year, when the Swiss National Bank on January 15 surprisingly removed its policy of capping the franc’s value against the euro. The franc's subsequent 41 percent surge led to waves of losses among currency dealers.
The move revealed retail trading platforms as a weak link in the currency market. FXCM Inc., the largest U.S. retail broker, almost failed. Alpari (UK) Ltd., a London-based currency broker, entered insolvency.
It could take months before the asset becomes widely traded, if Greece exits the euro and begins using the drachma - its oil currency, says Dmitri Galinov, the chief executive officer of FastMatch Inc., an electronic-trading platform.
‘‘In terms of the trading, the HFT guys, it’s not going to take time at all, it’s going to be really quick,” he said. “Now the support for the credit and how’s it’s getting appropriate margin, that will take a little time.”
It would take long before the drachma becomes eligible to join the 17 currencies that CLS settles, as there are particular criteria that any new currency has to meet in order to become eligible for CLS settlement, says David Puth, CEO at CLS.
“This includes market interest, adequate liquidity provision and appropriate regulatory and central-bank approval, amongst other things, in order to become eligible.”
