Abstract

This chapter addresses how the new master netting agreements for foreign exchange can help to reduce systemic risk. It provides some information about the development of these master netting agreements and the variety of possibilities for their use, as well as a view of how the market is working to solve these problems. Market participants need to be able to net now and to have enforceable bilateral netting agreements in place as soon as possible. The subject of bilateral contracts between private participants in the markets will therefore be addressed in this chapter. The major agreement that will be focused on is the agreement for foreign exchange netting, called the International Foreign Exchange Master Agreement (IFEMA).1