Basel headquartered Bank of International Settlements published today the first phase of the ‘Global Code of Conduct for the Foreign Exchange Market’. The central bank of the central banks, as the BIS is commonly known, has outlined the principles for adherence to the new standards of operation on the FX market.
The document has been designed to optimize the way in which companies handle foreign exchange orders and transactions and is a direct response to the breach of ethical standards by a number of major banks’ trading desks in recent years.
The Global Code of Conduct for the Foreign Exchange Market of was just released today in New York by the Foreign Exchange Working Group (FXWG).
Commenting on the announcement, the Chairman of the FXWG said: ”In a globalised world, the foreign exchange market is one of the most vital parts of the financial plumbing. One of the guiding principles underpinning our work is that the Code should promote a robust, fair, liquid, open, and transparent market.”
The Code has been developed by the BIS Markets Committee in tandem with a group market participants in order to gain complete insight into the matter.
The Markets Committee, located at the Bank for International Settlements, is a forum for senior central bank officials to jointly monitor developments in financial markets and assess their implications for the market operations of central banks.
Industry Commentary on the FX Code of Conduct
There has a been a universal welcoming of the document by the whole foreign exchange market community with a number of industry insiders commenting on the announcement. The head of the Market Participants Group and Chief Executive Officer of CLS, David Puth, said: ”This has been a unique opportunity for key participants in the FX industry to work together to develop a code of conduct that will have far-reaching implications across the market.”
The Global Head of FRC Trading at Thomson Reuters, Phil Weisberg, added: “We welcome this initiative by BIS and industry members to raise standards of conduct in the FX market and ensure we work collectively to uphold fair and efficient markets.”
“Thomson Reuters operates at the heart of the FX market and we take very seriously our role to set standards by establishing clear rules and increasing transparency across our transaction venues. We will help our customers understand their responsibilities under the Global Code and encourage their active engagement in the interests of the wider FX market,” he added.
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The company has also committed to publishing two white papers that aim to elaborate on the new responsibilities for the buy-side and for the sell-side of the market when it comes to adhering to the Code.
In a statement, EBS BrokerTec has elaborated that it strongly supports the publication of the first phase of the Global Code of Conduct.
“We welcome this initiative to strengthen the market and have been actively engaged in the development of the Global Code as members of the Market Participants Group (MPG) and through participation in various regional Foreign Exchange Committees (FXCs). As a key part of the FX market, we intend to adhere to the completed Global Code by incorporating the relevant portions within our processes.”
The company will also be promoting the Global Code amongst its members, and encourages the industry to adhere to the newly established standards.
The Managing Director of the GFMA’s Global FX Division, James Kemp, said, “The Global Code of Conduct was created as a result of strong central bank and industry desire to build confidence in the FX market and to develop globally consistent guidance that covers all market participants. The GFMA’s FX Division is fully supportive of this initiative.
“This is an opportunity for global market participants to demonstrate that they can put the right controls and guidance in place that are consistent with the principles of the code. We believe the introduction of a single code will create a common reference point to encourage good practice and re-build public confidence that the FX industry – which underpins global trade and investment – is functioning fairly and effectively,” he added.
Commenting on the matter, the CEO of ParFX, Dan Marcus, added: “The publication of the first phase of the single, globally applicable Code of Conduct by the Bank for International Settlement (BIS), represents a significant milestone for the FX market.”
“The release of comprehensive guidance on market ethics, information sharing, execution costs, trade confirmation and settlement ahead of the implementation of the final code demonstrates the importance of transparency and market engagement throughout the process,” he explained.
“The document ensures the wider market is actively involved and listened to, instils confidence and ensures that the Code, when completed in 2017, will be representative of the needs, requirements and concerns of the individuals and organizations that play an active role in the global FX market’s operation, governance and structure,” the CEO of ParFX elaborated further.
Central bank governors from G10 and beyond have also been widely positive on the 33 pages document.