“The implementation of credit controls is important; however, they should not lead to discriminatory execution or remove access for a segment of the FX markets.” This is the portal statement of a fresh 13-page whitepaper, where Traiana’s Basu Choudhury proposes a promising path that the industry ought to embark on together. Read the executive summary here – and download the full whitepaper.

By Traiana

The whitepaper, titled “FX Credit – Central Utility Model. Balancing the appropriate level of risk vs control in a dynamically evolving global FX OTC execution ecosystem”, can be downloaded as a 13-page pdf here. It is authored by Basu Choudhury, Traiana’s Head of Strategic Initiatives, with Igor Zubkov, Head of Credit & Documentation services, as contributor.


The implementation of credit controls is important; however, they should not lead to discriminatory execution or remove access for a segment of the FX markets. Given appropriate tools for measurement, monitoring and enforcement of credit, FX intermediaries can effectively manage their exposures to clients and liquidity providers without wholesale disruption to existing global execution models or the credit processing and framework that underpins the FX markets.  

Executive Summary 

The industry does not need to tear-up existing technology and tools, procedures and controls in order to achieve the desired balance for all FX participants; however, engagement and involvement in defining core API, data and interactions is a crucial first step.

Over the last 20 years, the evolution in global FX execution platforms, products and the legal and regulatory framework has led to enormous growth in FX Markets but has created numerous challenges. Unlike other asset classes with centralized venues and exchanges, FX is a hugely fragmented marketplace with multiple venues and liquidity pools. The unbundling of execution and credit has fueled the rise of non-bank market makers and algorithmic or systematic trading across buyside FX participants. Credit intermediaries have largely succeeded in managing the risks for G10 Spot, however we are now seeing greater electronification in other FX products- NDFs; FX Swaps; FX Options and EM currencies resulting in increased credit challenges. 

Although market driven disruptions have been few relative to the scale and volume of FX execution, their cause and potential long-term impact has recently led to calls for widespread changes to the existing risk models, methods and controls. 

In this paper we propose principles for a credit utility model which address some of the challenges faced by FX market participants. We will do this by not only looking back at some market disruption events but also looking forward to forthcoming challenges within the FX industry to assess both the strengths and weaknesses of the current process and framework. 

Our utility credit model will bring to light some areas of focus to improve the current framework without destroying access to liquidity. Importantly, the desired evolution cannot be achieved in isolation, a partnership across FX markets participants, vendors and industry bodies would be beneficial for a viable end state.