GFMA Submits Comments to the EC and the ESMA on Consistent Regulatory Treatment for Incidental Foreign Exchange Transactions

25 March 2014

The Global Foreign Exchange Division (GFXD) of GFMA provides comments to the European Commission and the European Securities and Markets Authority (ESMA) on consistent regulatory treatment for incidental foreign exchange (FX) transactions related to foreign securities settlement, commonly known as, “FX Security Conversions.”

As part of the clarification and as an interim step, the GFXD asks the European Commission to consider an FX transaction that is entered into solely to effect the purchase or sale of a foreign security (FX Security Conversions) – to be a bona fide spot transaction in situations where the settlement period is greater than two days.

To do so, the GFXD requests the European Commission and National Competent Authorities in the EU to confirm that FX Security Conversions are not financial instruments under the Markets in Financial Instruments Directive (MiFID). This would also have the effect of ensuring that FX Security Conversions are not subject to the European Markets infrastructure Regulation (EMIR). The GFXD has continually requested consistent global treatment for FX Security Conversions, and this would bring Europe into convergence with the US and Canada.

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