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In the recent release of ‘The Fair and Effective Markets Review’ FEMR, into how to restore trust in FICC markets, the report made the following recommendations in sections 4a and 4b:

4. Launch international action to raise standards in global FICC markets

a. Agree a single global FX code, providing: principles to govern trading practices and standards for venues; examples and guidelines for behaviors; and tools for promoting adherence. The Review strongly welcomes the recent announcement by central banks to work towards those goals; (BIS and national central banks including the Bank of England 4.3.3)

b. As part of that work, improve the controls and transparency around FX market practices, including ‘last look’, ‘time stamping’ and ‘internalisation’ (BIS and national central banks including the Bank of England 4.3.3)

Following the recommendations The Bank of International Settlements (BIS), has now set up a Foreign Exchange Working Group (FXWG) to strengthen code of conduct standards and principles in foreign exchange markets. The group, which operates under the auspices of the Markets Committee, is headed by Guy Debelle (Reserve Bank of Australia), Chairman of the Markets Committee. The group’s membership covers major financial centres in both advanced and emerging market economies.

Guy Debelle said today:

“A single, global common code of conduct is a necessary goal for the FX industry. The Code will be principles-based ‒ rather than rules-based ‒ and will provide guidance on what is, as well as what is not, appropriate behavior for practitioners in the FX market.”

The main objectives of the FXWG’s work are to:

“facilitate the establishment of a single global code of conduct standards and principles and to promote greater adherence to these standards and principles. The Code is intended to cover all parts of the global wholesale FX market, with appropriate consideration to local circumstances.”

This work builds upon that of the various regional foreign exchange committees (FXCs) agreed at the latest global FXC meeting ¹ and puts a more direct focus on the development of a single global code for the FX market, engaging a broader set of regions in the process. The work will provide input into the wider official effort on market conduct coordinated by the Financial Stability Board.

To support the FXWG, a Market Participants Group (MPG) is being established, drawing on participants from the sell side and buy side of the market as well as FX infrastructure providers. This group also has a wide and diverse geographical scope. The FXWG and the MPG will work closely with the FXCs and reach out to jurisdictions beyond those represented on the Markets Committee. The MPG will be chaired by David Puth, Chief Executive Officer of CLS.

The FXWG has just held its first meeting in Singapore. The work is proceeding in two parts. One workstream is drafting the new single global code by harmonising common elements of the existing FX codes as well as drafting new principles for those areas not adequately covered in existing codes, with input from the MPG. The other workstream will develop proposals to promote and incentivise adherence to the new single global code.

MPG members are:

Chris Allen, Barclays
Marshall Bailey, ACI
Cédric Beaurain, Société Générale
James Blinder, Citi
Adrian Boehler, BNP Paribas
Justin Chan, The Hongkong and Shanghai Banking Corporation Limited
Woody Chan, Standard Chartered Bank (Hong Kong) Limited
Huw Evans, UBS
Patrick Fleur, PGGM
Darryl Hooker, EBS
Hirochika Iwadare, Bank of Tokyo-Mitsubishi UFJ
Hugh Killen, Westpac
Sung Soon Kim, Industrial Bank of Korea
Chee Kin Lam, DBS Group Holding Ltd
Russell Lascala, Deutsche Bank
Elisabeth Mathson, SEB
Ed Monaghan, RBC
S S Pradhan, State Bank of India
Troy Rohrbaugh, JPMorgan
Gilberto Romero, Banco Ve por Más
Lisa Scott Smith, Millennium Global
Wei Sun, China CITIC Bank
Koichi Takenaka, Mizuho Bank
Christopher Vogel, BlackRock
Phil Weisberg, Thomson Reuters
Fan Yang, China Foreign Exchange Trade System & National Interbank Funding Center
Dong Il Yoon Seoul, Money Brokerage Services, Ltd

Filed under: FX, Paul Blank, Regulation |