Professor Viral Acharya says it may not be entirely accurate to say that forex derivatives won’t ever cause systemic risk.
In the coming weeks, the US treasury secretary Timothy Geithner will decide if foreign exchange derivatives should also be subject to increased regulations, just as other derivatives market. The Dodd-Frank Act, which proposes increased regulation of the over-the-counter (OTC) derivatives markets, gave the treasury secretary a year to decide if and why forex derivatives are different from others, and if and why they should be exempted from the Act. The decision on this will soon be due.
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