The first part of the FX Global Code of Conduct was launched in May 2016. It was a fairly brief prelude to the document that has been published by the Bank of International Settlements today. The new paper elaborates in detail on the industry’s need for transparency in execution and governance.
The global code is aiming to promote a robust, fair, liquid, open, and appropriately transparent market where different market participants are actively supported by a resilient infrastructure.
The publication of the code has been widely supported by the industry, as the Market Participants Group (MPG) was actively involved in its design.
Market Integrity and Reputation Restoration
Commenting on the launch, the Chairman of the MPG and CEO of CLS, David Puth, said: “The public perception of financial markets, deeply shaken by the financial crisis of 2008, was made worse by certain behaviors in the foreign exchange (FX) market. To help restore trust in the FX market, the industry has come together around a set of common principles and best practices – the FX Global Code.”
“The Code is about how we can build a stronger marketplace, by working together across the public and private sectors to identify the best practices for the industry. From the outset, we sought to develop the Code in a collaborative manner. This has been a defining factor in ensuring that it reflects good market practice and is embraced by the broadest number of market participants,” Put explained.
The CEO of CLS is also highlighting that the effort is far from over and that the publication of the full code is only the beginning of the process of restoring confidence in the global FX market.
The CEO of ParFX, Dan Marcus, added: “This initiative sets out guidelines and principles that will strengthen the integrity and effectiveness of the FX market. The Code aims to instil the notion of truly ethical behaviour for all participants, and outlines an effective framework that, amongst other things, promotes responsible and sustainable trading behaviour. These key values now need to be hardwired into the FX market.”
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Thomson Reuters’ Managing Director of Trading, Neill Penney, highlighted that the company is fully committed to defining clear rules and increasing transparency across the firm’s transaction platforms. He also expressed that the code will only succeed if all participants take a much more proactive approach to conduct, as both buy-side and sell-side participants play their part.
“The reputation of the currency market has been tarnished in recent years by the behaviour of a small number of individuals. The FX Global Code is a significant effort by both central banks and the FX industry to spell out principles around ethics, best practices and transparency that can apply globally,” explained Curtis Pfeiffer, Chief Business Officer at Pragma Securities.
Pragma’s CBO also explains that the solid framework which the code is providing for a wide range of best practices, including specific guidance on algorithmic trading, is essential.
“We strongly believe algorithmic execution, because of the control and transparency it can provide, combined with transaction cost analysis (TCA), will better help institutions to comply with the Code while simultaneously improving their execution quality,” Pfeiffer concluded.
Following is the full FX Global Code of Conduct: