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Screenshot of a breaking news alert e-mail from Q2 2017
In less than two hours, on what might otherwise be a fairly slow day for Forex Industry News, prepare for a slew of press releases and commentary by a variety of FX industry participants (including on this site) on the about-to-be-released FX Global Code of Conduct.
The new Code of Conduct, coordinated and formally issued by the Basel-based Bank for International Settlements (BIS), is not exactly a surprise since already a year ago the BIS stated what will be in it.
The Code of Conduct is the result of an industry-wide initiative developed over two years, through a partnership between central banks and FX market participants from at least 16 jurisdictions around the world.
The Code’s aim is to promote the integrity, trust and effective functioning of the global wholesale FX market which has suffered as a result of trader misconduct, breaches of client confidentiality, failure to manage conflicts of interest and inappropriate order handling.
We expect a whole range of FX brokers, clearing houses, traders, electronic networks and many others to issue statements which all boil down to ‘we’re all in favour of the new Code, and now FX traders can rest assured that they will be treated fairly‘.
It does seem somewhat silly, to have to codify a global undertaking stating that banks and brokers won’t any longer effectively cheat their clients by offering them FX rates and terms which they knew were in favour of ‘the house’. It is almost akin to all the casinos in the world making a joint statement that loaded dice and tilted craps tables will no longer be tolerated.
In any event, our view is that the Code is a good thing, mainly in that it will raise awareness among traders that bad things have been happening to them, and that they should remain aware and vigilant. It is impossible to legislate away fraud. Consumers must always have one eye open in business dealings, especially when most of the information / power is on the other side of the table. Banks have long viewed their FX operations as a great place to quietly fleece customers without them really noticing. Hopefully the Code of Conduct – just the fact that it is needed – wakes up those who use FX trading services to make sure that they’re not the ones getting fleeced.