Regarding the new regulation Hendarsah was quoted in the Jakarta Post “back then, Bank Indonesia had created a list of assets that could be used as underlying for FX transactions. These assets are related to export-import activities and investments. However, banks have often said that the list is not compatible anymore with what their clients have.” Regarding the new regulations, the Indonesian Foreign Exchange Market Committee (IFEMC), a group that was established earlier this year to boost domestic FX transactions, will formulate a new and longer underlying list and propose it to Bank Indonesia. The IFEMC consists of representatives of the central bank, the Financial Services Authority (OJK), the Indonesian Bankers Association and Association Cambiste Internationale (ACI) Indonesia, as well as state, private, foreign, joint venture and regional development banks. Besides making available a wider variety of assets for underlying, the central bank’s new regulations will also enable customers to conduct ‘netting’.

Bank Indonesia believes that simplifying requirements can make FX trading as attractive as FX facilities provided offshore. Currently, customers need to provide new underlying each time they renew a contract. However, Hendarsah continued: “Say that a customer signs a three-month forward contract and he decides to roll it over, he can do so without having to provide a new underlying as long the underlying’s maturity period is not due.”

The amount of FX transactions in Indonesia is relatively low compared to its regional peers. Indonesia books daily transactions at an average value of USD $5 billion, while Malaysia and Thailand post USD $11.05 billion and USD $12.78 billion per day, respectively. Meanwhile, with 67 percent, domestic FX transactions are mostly concentrated on the spot market, followed by swap (28 percent), forward (four percent) and other instruments (one percent). However, Bank Indonesia Governor Agus Martowardojo that he would like to increase this daily figure to USD $15 billion by 2017.