Regulators, financial institutions adopt FX code of conduct
(30 May 2017 – Global) Following recent misadventure from banks and financial institutions related to currency market manipulation, regulators and financial firms from around the world launched a new code of conduct for global currency trading.
The code also included measures aimed at ensuring its universal adoption by the world's major financial institutions
The 75-page outlines 55 high-level principles for how participants in the world's biggest financial market should conduct business.
While it remains voluntary, the agreement outlined a framework that some of the officials working on the project said should mean all major market players will commit to conforming to the new code.
All of the major central banks involved said they would commit to the guidelines and would demand it of their counterparties in the US$5 trillion a day market which is the world's largest.
The industry FX committees run by each of the central banks will also require a formal commitment from the dozens of major institutions who sit on their panels and a new joint Global FX Committee will monitor implementation of the code.
"I would be surprised if a major wholesale market participant did not get behind the Code," said David Puth, the head of settlement bank CLS and chair of the committee of market participants who have funnelled banks and other financial firms' input to the code.
"Over the course of the next 12 months, we will look for all wholesale market participants to adopt the principles."
UK regulators, who oversee the world's biggest FX trading centre in London, are expected to embed the code in the new senior managers' regime for financial firms.
Deputy Reserve Bank of Australia Governor Guy Debelle, who has led work on the code and an earlier "preamble", said other regulators were likely to follow suite.
"Our (Australian) securities regulator is going to utilise the code as the standard they expect," he said.
"If that happens in the UK, given London's importance for forex, that will add a fair bit of bite to the whole process. In our case, I know that our securities regulator is going to."
The code provided a list of disclosures that the new generation of algorithmic traders should make, including a clear description of their execution or aggregation strategy, fees, routing and sources of liquidity.
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