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Screenshot of a breaking news alert e-mail from Q2 2017
ASIC released Report 525 Promoting better behaviour: Spot FX today. This report sets out ASIC’s observations on key behavioural drivers of conduct arising from recent ASIC investigations into the wholesale spot foreign exchange (FX) businesses of the major Australian financial institutions.
The spot FX market is a key global market and is of systemic importance to the Australian economy, with a daily average turnover of US$31.4 billion in Australia. The effective functioning of the spot FX market relies on all participants acting with integrity and fairness.
ASIC’s report illustrates the behavioural drivers of conduct that, in ASIC’s view, are likely to lead to poor conduct if not adequately managed. The report also describes a number of good practice principles for managing these drivers to more effectively prevent, detect and respond to inappropriate practices. Market participants should consider how these good practice principles may be adopted to improve their internal arrangements for managing risks relating to inappropriate conduct.
The release of ASIC’s report coincides with the release yesterday of Phase Two of the FX Global Code of Conduct (FX Global Code). The FX Global Code provides a global set of practice guidelines designed to promote the integrity and effective functioning of the wholesale FX market. Where relevant, Report 525 makes reference to related principles of the FX Global Code and encourages market participants to adhere to high standards of market practice.
ASIC Commissioner Cathie Armour said:
Conduct in the wholesale spot FX businesses of some of Australia’s largest financial institutions has fallen short of our expectations. We have taken enforcement action where we have come across this poor behaviour.
Our focus for the future is making sure this doesn’t happen again. Market participants need to make sure they have the appropriate systems and controls in place to prevent, detect and address inappropriate conduct within their organisation,’ she added.
ASIC will use this report as a reference point for its surveillance of the FX markets and, where appropriate, the broader wholesale over-the-counter markets.
Just yesterday NEX Markets announced that following the publication of the FX Code of Conduct, it plans to adopt the Code’s principles across its FX trading platforms.