This document summarizes new regulatory requirements for FX derivatives markets under Dodd Frank and EMIR regulations. Key changes include requirements for electronic trading, reporting all trades to trade repositories, centrally clearing eligible OTC derivatives, implementing risk mitigation procedures for non-cleared derivatives including margining and collateral management, record keeping, and enhancing transparency. These regulations aim to strengthen markets and reduce risks following the 2008 financial crisis. Compliance requires changes to workflows, increased data collection and reporting, and integration of new processes across organizations.

1. ESSENTIAL
FX REGULATORY CHANGES
..andtheSolutionstoAddressThem

2. Agenda
Dodd Frank
Documentation (ISDA/Credit Docs)
Trade Acknowledgements
Trade Confirmations
Trade Repository Reporting
Central Counterparty Clearing
Position Compression
Position Reval., Margin and Collateral
Management
Record Keeping
Eligibility and Disclosure (Business
Conduct Stds)
Overview of the Regulatory Changes
Implications for FX Market Participants
EMIR
Documentation (ISDA/Credit Docs)
Trade Acknowledgements
Trade Confirmations
Trade Repository Reporting
Central Counterparty Clearing
Position Compression
Position Reval., Margin and Collateral
Management
Record Keeping
Software Solutions to Address the Regulatory Requirements
http://www.baxter-it.com/regulation

3. Overview of Regulatory Changes
Post 2008 Financial Crisis the “Group of Twenty” (G20) called for reform to improve practises in OTC
derivatives markets.
Identified need to strengthen international financial regulatory system.
New regulations aim to:
Bring safer Financial markets and address risks of OTC trading across jurisdictions
Enhance transparency, promote financial stability and support detection and prevention of
market abuse
Regulators have aimed for consistency between jurisdictions <== ! ! !
Dodd Frank July 2010
EMIR (European Market Infrastructure Regulation) August 2012
Common goals:
Electronic Trading platforms to ensure transparency
Reporting to Trade Repositories
Central Clearing
Risk Mitigation even for non cleared OTC Derivatives <== ! ! !
Margining and Collateral <== ! ! !
Respond to Regulator query
Conduct of Business

4. Implications for FX Market Participants
Some complicated jurisdictional overlap
US Regulatory Requirements WILL affect you: far reaching arm of US regulation.
Complicated Product differentiation
Tier 1 banks must be able to comply to ALL of the regulatory requirements due to their
product range
Significant technology implications
New work flows
Dramatic increase in data fields required
Trade
Client
Counterparty
Complicated integrations required
Most deadlines to be compliant are already passed (some extensions)

5. Useful Definitions
NON EXEMPT FX SWAPS
Foreign Currency Options (including collared options)
Non- Deliverable FX Forward Contracts ('NDFs) involving foreign exchange.
“EXEMPT” SWAPS
FX Swaps
FX Forwards
NDF Non Deliverable Forwards
FC Financial Counterparty
(Entering into derivative transactions under EMIR identifies you as a counterparty.)
NFC Non Financial Counterparty
DCO Derivative Clearing Organisation
CCP Central Counterparty
ESMA European Securities and Markets Authority
CFTC Commodity Futures Trading Commission
UPI Unique Party Identifier
USI Unique Swap Identifier
UTI Unique Trade Identifier
LEI Legal Entity Identifier

6. Documentation
Documentation must be more standard and participants are
required to homogenise terms
Documentation is required to be kept electronically
Documentation must be made available to Regulators on demand
The CFTC rules include detailed requirements for client relationship
documentation, including agreement on valuation methods.
US EU

7. Trade Acknowledgement
Trade Acknowledgement
New work flow (in trade cycle)
Market Participants must now acknowledge trades after trades
have been executed (in dealing channel)
Records of acknowledgements must be kept and made available to
Regulators on demand (timestamp, who etc.)
US EU

8. Trade Confirmations / Trade Repository Reporting
Trade Confirmations (Customers and Counterparties)
Electronic Confirmations (Not in trade cycle, by separate division)
Unique Trade Identifiers (must be created, passed & stored)
Unique Swap Identifier (must be created, passed & stored)
Unique Product Identifier (must be stored)
Legal Entity Identifier (must be stored)
Trade Repository Reporting
All trades MUST be posted to a Trade Repository
Real time, trade by trade (Dodd Frank)
At the latest T+1 (EMIR) <== real time better
Information to be reported
Parties to the contract, type of contract, maturity, notional value, price, settlement date
All data must be made available to Regulators on demand
US EU

9. Central Counterparty Clearing / Trade Compression
Central Counterparty Clearing
ALL FX options and NDF trades must be cleared by a Derivatives Clearing Organisation
('DCO' e.g. CME) or a Central Clearing Counterparty ('CPP')
Either become Clearing Member or use a Clearing Broker
The DCO/CCP will determine margin calculation methodology for any positions cleared
(Bank needs to calculate for itself too)
Trade Compression (Customers and Counterparties)
Trades must be compressed for more efficient clearing and margining
In relation to portfolios among swap dealers/participants, both must establish, maintain
and follow written policies and procedures for:
1. Terminating each fully offsetting swap in a timely fashion
2. Engage in bilateral portfolio compression when appropriate
3. Engage in multilateral portfolio compression exercises, where appropriate
US EU

10. Position Reval., Margin and Collateral Management
Products requiring margining and collateral
Cleared Swaps
FX Options and NDFs
Uncleared Swaps
FX exchange traded swaps and forwards
Margin Process
Revaluation is required to happen every day
Margin requirements established and held by the DCO/CCP for cleared
swaps, self established for “exempt” ones.
Margin must be collected from Corporate Users and exchanged with
Financial Counterpaties
Margin transfer can be activated above a threshold
Participants are required to reconcile their own margin figures
All data must be made available to Regulators on demand
US EU

11. Record Keeping
Full, complete, and systematic records
Maintained from trade execution through to 5 years
after termination
Confirmations
Acknowledgements
Agreements
Changes in terms
Master and Credit Support Agreements
Electronically maintained and augmented
New requirements must be added gradually
US EU

12. Eligibility and Disclosure
(Business Conduct Stds)
Counterparty Verification of Eligibility
(eligible contract participant (“ECP”), Special Entity.)
Disclosure of Material Information
(Swap material risks and characteristics, conflicts of interest)
Scenario Analysis
provide Counterparty with term sheet
US EU

13. Agenda
Dodd Frank
Documentation (ISDA/Credit Docs)
Trade Acknowledgements
Trade Confirmations
Trade Repository Reporting
Central Counterparty Clearing
Position Compression
Position Reval., Margin and Collateral
Management
Record Keeping
Eligibility and Disclosure (Business
Conduct Stds)
Overview of the Regulatory Changes
Implications for FX Market Participants
EMIR
Documentation (ISDA/Credit Docs)
Trade Acknowledgements
Trade Confirmations
Trade Repository Reporting
Central Counterparty Clearing
Position Compression
Position Reval., Margin and Collateral
Management
Record Keeping
Software Solutions to Address the Regulatory Requirements
http://www.baxter-it.com/regulation