The Bank for International Settlements (BIS) has released what it calls the first phase of the Global Code of Conduct for the Foreign Exchange Market, and principles for adherence to the new standards.
The BIS’ Foreign Exchange Working Group (FXWG) Chairman Guy Debelle, whose day job is Assistant Governor of the Reserve Bank of Australia, had the following to say:
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 FXWG was set up in July 2015 and operates under the auspices of the BIS’ Markets Committee. The group’s membership covers major financial centres in both advanced and emerging market economies, and its work is supported by the private sector Market Participants Group.
David Puth, head of the Market Participants Group and Chief Executive Officer of CLS, added:
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 release was welcomed by central bank Governors from major advanced and emerging market economies and regional foreign exchange committees.
The complete Code and the adherence mechanisms, which aim to promote the integrity and effective functioning of foreign exchange markets, will be released in May 2017.
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.
After the BIS’ press release hit the wires, a number of leading FX industry participants worldwide chimed in and pledged their support for the FX Code of Conduct, including ICAP’s EBS BrokerTec, Thomson Reuters, and ParFX.
According to Dan Marcus, CEO of ParFX:
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.
This 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 organisations that play an active role in the global FX market’s operation, governance and structure. The process highlights how regulators and market participants can work together to tackle market issues and ensure everyone’s voice is heard.
The new code, which continues to be developed in consultation with central banks and market participants alike, will apply to all foreign exchange (FX) market professionals and institutions, regardless of their geographical location or size of their operations. It will also complement existing industry-led solutions such as ParFX, which is a clear example of how the market has worked together to identify and solve a major issue.
In partnership with a group of the largest FX trading institutions in the world, the ParFX model has led from the start in its drive to address disorderly trading behaviour in whatever form it takes, and to offer a genuine alternative. We believe the principles underpinning the Code of Conduct are very closely aligned with that of our own platform.