Paul Stafford, the director of marketing for Atlas Risk Advisory, in an article in TREASURY & RISK, explained that, "Multinational corporations usually obtain FX derivatives from banks through over-the-counter (OTC) trading. The unregulated OTC derivatives market generally offers companies the best selection of instruments, but a series of scandals in which banks have been caught gaming various OTC markets indicates that caution is appropriate."

He points out that, "Price manipulation is not the only way in which banks pose risks for their foreign exchange clients. Counterparty credit risk is another concern. When Lehman Brothers moved from investment-grade credit to bankruptcy over a single weekend in 2008, the company had more than 67,000 open trades. While Dodd-Frank, Basel III, and other regulatory changes have reduced this risk by requiring banks to maintain higher Tier 1 capital ratios, multinational corporations still risk having their derivatives contracts become worthless should a bank default during times of high volatility/low liquidity."

In the rest of this article Paul goes on to list "the actions that corporate treasurers can take to create transparency and safety where obfuscation and danger prevail."

Read more in the full article - recommended - here.