What role will banks play to expand the FX futures market?

FX Futures is another way to handle credit charge issue, says KBANK.

Thiti Tantikulanan, Capital Markets Business Division Head, KASIKORNBANK:

Unfortunately market participants especially end-users on hedging are not welcoming the risk incurred from the mismatch between FX Futures and their underlying exposure, which is, on the other hand, being well handled using OTC products.

The banks will have to start with educating customers on how to use FX Futures and also how to cope with residual mismatch or fixing risk. Once the real demand is there, providing liquidity in FX Futures market will become another necessary task for banks.

For banks' own position, capital savings can be an important factor to incentivise banks to switch to FX Futures instead of OTCs. For what it's worth, capital savings on credit exposure applicable on OTCs transactions may not be coming soon enough to cope with lower market liquidity due to Basel III and EMIR/DF impact.

FX Futures is then another way to handle credit charge issue. This is probably how banks can be encouraged to provide more liquidity in FX Futures market.