Indonesia urged to go further to build hedging market

Banks warn that bringing call spreads onshore is not enough and could produce distortions

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Under construction: financial engineering is needed that may be difficult under the current regulatory framework

Market participants are warning of a distorted derivatives market in Indonesia if the central bank implements proposed reforms to bring certain hedging transactions onshore without providing enough flexibility or fostering a broad range of end-users.

"Before bringing more products onshore, it is more important to fix the balance between supply and demand. In terms of swaps, introducing an onshore call spread is going to reduce [the number of] people buying dollar forwards, so we have to find the

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