Foreign Exchange Committee Issues Y2K Guidelines

New York (PROTEXT) - The Foreign Exchange Committee, joined bya number of international financial industry associations andcommittees in Australia, Canada, England, Japan, Singapore andthe United States, today issued guidelines designed to minimizeconfusion associated with any foreign exchange contracts(including options and swaps) that fail to settle as a result ofY2K-related events that affect clearing banks or central banks. The recommended guidelines, known as "Y2K: Best Practice inthe Foreign Exchange Market," include background information, theterms of the Best Practice, general notes and a statement as tohow the Best Practice is to be used. In general, the Best Practice recommends a short waitingperiod after a Y2K event occurs that affects a clearing bank or acentral bank. If the Y2K event is not remedied within the specified waitingperiod, the Best Practice states that some or all affectedtransactions may be liquidated at then current market prices. Parties are, of course, free to mutually agree to take actionsother than as specified in the Best Practice. The guidelines do not apply to a failure to settle as a resultof a Y2K problem within the systems of a party to a contract,which would be covered by the non-payment provision of theapplicable contract. Parties to transactions will retain the rights and remediesprovided in their contractual arrangements. In particular, the Best Practice would not change creditprovisions and defaults unrelated to Y2K events. The guidelines reflect commercially reasonable standards formarket participants and provide guidance to regulators andtribunals who may be asked to consider the actions ofparticipants in the foreign exchange market in the event ofproblems resulting from the millennium date change. It is anticipated that foreign exchange market participantsboth inside and outside of the U.S. will use the guidelines. The guidelines were prepared by a joint Working Group of theFinancial Markets Lawyers Group and the Foreign ExchangeCommittee's Operations Managers Working Group. The Foreign Exchange Committee is sponsored by, butindependent of, the Federal Reserve Bank of New York. A copy of the Best Practice is available at the ForeignExchange Committee's website at http://www.ny.frb.org/fxc. The Australian Financial Markets Association, The BritishBankers' Association, the Canadian Foreign Exchange Committee,the Emerging Markets Traders Association, the International Swapsand Derivatives Association, Inc., and the Singapore ForeignExchange Market Committee have joined in the issuance of thisBest Practice. The Tokyo Foreign Exchange Market Committee hasendorsed this Best Practice, which is currently being consideredby trade associations in other countries. ots Original TextService: Foreign Exchange Committee Internet:http://www.newsaktuell.de Contact: Kathleen Baum or AndreaBergofin for Foreign Exchange Committee Tel.: (USA) 212-902-5400Web site: http://www.ny.frb.org/fxc

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