Jon Vollemaere recently spoke to Euromoney on the likely effects of Uncleared Margin Rules (UMR) on Prime Brokerage in the FX industry. The industry will need to evolve, moving towards a centrally cleared model which provides a more efficient credit and settlement solution. Here are a few quotes from Jon. You can read the full article here.
“We will probably see some prime brokers change their business models, maybe offering a tiered pricing plan for different products or pursuing partnerships to function as a clearing prime broker, offering services for both cleared and uncleared products.”

“Having to post margin makes the business far more capital intensive and therefore it has to change.”

“We have been saying for years that it makes sense to use a clearer as a more efficient way of settlement and UMR will only push that further,” he says. “However, clearers need to review their pricing of FX products for the marriage to last.

“Liquidity would be impacted in the short term as prime brokers work to get pricing right and some marginal clients move away from trading FX, but the market is used to managing new regulations, and liquidity would bounce back.”