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RESERVE BANK OF AUSTRALIA

Bulletin – March Quarter 2010

The Foreign Exchange Market and Central Counterparties

Mark Manning, Alex Heath and James Whitelaw

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Abstract:

The financial crisis has led to considerable efforts to improve risk management practices in financial markets. One of the main proposals being suggested in international fora is to increase the use of central counterparties. This article discusses the potential for central counterparty arrangements to complement existing risk management practices in the foreign exchange market.