New rules for FX market conduct agreed by central banks

FX

Foreign exchange (FX) market committees, run by the world’s major central banks, have agreed to a new code of conduct which provides guidelines for what dealers can say to each other about the market.

The document, quoted on Reuters, states that “FX market participants are advised to apply the global “high-level principles” set out in this document to the FX market as it evolves, including with respect to new FX products, processes and technologies.”

The new instruction will add to the codes already in place, also approved by the FX committees and together, they will advise asset managers on how to attain the best currency transactions for their clients.

The document mentions that it is important to keep clients as informed as possible. “It is acceptable to share with customers a view on the general state of and trends in the market. However, any market colour given regarding market activity should be sufficiently aggregated and anonymised so as to not disclose FX Trading Information or Designated Confidential Information,” it said.

Furthermore, the document reiterates that “FX market participants should not pass on FX Trading Information to other FX market participants that might enable those entities to anticipate the flows of a specific client or counterparty, including around a fix.”

The new rules will:

  • Stop traders from sharing information about orders submitted for execution in daily benchmark fixing sessions
  • Seek to categorise confidential information
  • Prohibit the use of traditional slang
  • Provide more guidance on what dealers and participants can say about the market

These global rules have been put in place after the market manipulation scandal which led to investigations lasting for two years and cost banks several billion in fines that changed the reputation of the FX market.

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