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“The value-add of clearing does not exist for FX and FX options. The prime broker system works well and the concept of clearing as an alternative has never been made clear to be a superior system,” Donovan told FOW.

Donovan explained that the prime broker system clearing presents the same security that central clearing would provide.

“For an institution like a hedge fund that has a prime broker relationship with a major bank, they feel very comfortable with their credit risk with their strong banks as a counterparty,” he explained.