@article{Introduction:667,
      recid = {667},
      author = {Engert, Walter},
      title = {An Introduction to Multilateral Foreign Exchange Netting},
      publisher = {Bank of Canada},
      address = {1992},
      pages = {1 online resource (31 pages)},
      abstract = {This paper examines some of the key issues that arise in  the design of a multilateral foreign exchange netting  facility. First, it presents a brief overview of the  primary risks that exist in the foreign exchange market.  Bilateral netting, close-out and multilateral netting are  also introduced. Then three aspects that are central to the  design of a multilateral netting facility are considered:  management of credit risks; provision of settlement and  liquidity arrangements; and membership criteria of the  clearinghouse. To ensure that risks are in fact reduced,  and not exacerbated, by multilateral netting, efficient  mechanisms must be established to manage credit risks (both  forward replacement risk and settlement risk) arising in  the clearinghouse and to manage the liquidity needs of the  clearinghouse. Accordingly, a highly reliable loss  allocation procedure is fundamental Ensuring the  reliability of loss allocation suggests a central role for  collateral, and this collateral would also underpin any  needed liquidity arrangements. This paper also suggests  examples of specific risk management procedures that would  limit the risk that members can present to the  clearinghouse. Such procedures would also ensure that the  clearinghouse could promptly arrange the needed liquidity  and recover any loss in the case of the default of any  single member. Having these procedures in place would in  turn require the establishment of a real-time  data-processing and communications system.},
      url = {http://www.oar-rao.bank-banque-canada.ca/record/667},
      doi = {https://doi.org/10.34989/swp-1992-5},
}