The New FX Suitability Standard: Why Deaglo Is Built for Your Compliance Needs

In today's volatile FX markets, the traditional approach of merely disclosing risks is no longer sufficient. Financial institutions are now expected to demonstrate product suitability, document client understanding, and scale compliance processes effectively. This shift is driven by increasing regulatory scrutiny and the need to protect clients from complex financial products they may not fully comprehend.

The UBS Case: A Cautionary Tale

A recent example highlighting the importance of robust compliance measures involves UBS, which is currently in discussions to compensate clients who suffered significant losses from complex foreign exchange derivatives. These losses were triggered by market volatility following U.S. President Donald Trump's tariff announcements, leading to a sharp decline in the dollar and a surge in the Swiss franc. The affected financial products, known as conditional target redemption forwards, are intricate currency derivatives typically suited for sophisticated investors. However, critics argue that these products were mis-sold to clients lacking the necessary understanding, resulting in collective losses reportedly reaching hundreds of millions of Swiss francs. In one instance, a client, along with three others, incurred losses exceeding 4 million Swiss francs ($4.7 million).

The Challenge: Outdated Infrastructure Meets Modern Demands

As the demand for FX options surges, many institutions find themselves constrained by outdated, manual infrastructures. This mismatch between modern market demands and legacy systems hampers the ability to ensure compliance and manage risks effectively. Key tasks such as pricing, booking, and exercising FX options remain manual at most banks, limiting transparency and increasing the potential for disputes.

Deaglo’s FX Suitability Engine: A Comprehensive Solution

To address these challenges, Deaglo offers a third-party technology platform designed to help banks, brokers, and funds meet the new standards of FX compliance with precision and scalability. Our solution encompasses:

• Advanced Mathematical Modeling: Simulates client risk across products, aiding in matching exposures to appropriate instruments with institutional rigor.

• Automated Product Suitability Reports: Generates AI-powered reports with a Suitability Score based on client risk appetite, product parameters, and regulatory guidelines.

• Client-Friendly Explanations via AI: Utilizes natural language processing to explain structured products in simplified terms, ensuring client understanding before trading.

• Immutable Audit Trail: Every recommendation and report is time-stamped, logged, and exportable, creating an audit-proof record for compliance and regulatory defense.

• API-First & Scalable: Easily integrates into existing sales platforms, CRMs, or execution systems, built for scale across various institutional desks.

The Urgency: Market Dynamics and Regulatory Expectations

FX options trading volumes have seen a significant increase, with $230 billion traded daily. However, only 15% of this is traded electronically, indicating a heavy reliance on manual processes that expose the industry to operational and regulatory risks. Clients are becoming more sophisticated, and regulators are intensifying their scrutiny. Institutions can no longer afford missteps; they require platforms like Deaglo to provide a defensible, scalable framework for confident operation.

Conclusion: Future-Proofing Your FX Business

Deaglo empowers financial institutions with tools that protect clients, safeguard revenue, and eliminate the risk of mis-selling. By integrating Deaglo’s FX Suitability Engine, institutions can redefine trust, compliance, and performance in FX sales.

Schedule a demo today to see how Deaglo can help you build a future-proof FX business.

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