Welcome for FX market code of conduct

The Global Financial Markets Association (GFMA) is welcoming today’s publication of the global code of conduct for the foreign exchange (FX) market, which provides “a common set of guidelines to promote the integrity and effective functioning of the wholesale FX market.”

“From the outset, the GFMA’s FX division has been fully supportive of this initiative to create a global code of conduct for FX,” said James Kemp, its managing director. “Given that foreign exchange underpins international trade and investing, we believe a single, global code provides a common reference point to encourage good practice and re-build public confidence in the FX market.

“This is an opportunity for all wholesale FX market participants to demonstrate that they can put the right controls and guidance in place that are consistent with the principles of the Code and that ensure the market is operating fairly and effectively.

“In response to the first phase of the Code, published in May 2016, our members have already made significant enhancements to their conduct and control standards. For example, placing greater emphasis on the first line of defence, strengthening the control environment and establishing more robust oversight structures. More emphasis is being placed on conduct training, as well as adherence to procedures and policies.

“However, there is no room for complacency. With the complete Code now published, our members will continue to strengthen their technology, policies and procedures to ensure they align with the principles.”

The new code reflects the efforts by the Bank for International Settlements (BIS) and 21 central banks over the past two years to create a set of principles of acceptable behaviour for any firm, government or individual participating in the global FX market. It followed a series of allegations since 2012 against banks that they manipulated the London interbank offered rate (Libor), the benchmark used to value more than US$300 trillion of FX and other securities worldwide.

Although it has generally been welcomed, critics suggest that the code lacks teeth and needs to be backed up by regulation to make any impact.“The real takeaway from thecode is ‘buyer/seller beware’,” said James Singleton, founder and chief executive officer (CEO) of Curex Group Holding, a New York-based FX execution services and data analytics provider. “It’s not focused enough on the resolution of conflict and fairness … If I’m an asset owner or a buy-side manager, what does the code do for me other than warn me?”

The GFMA’s FX division’s members comprise 25 global FX dealers, collectively representing about 85% of the FX dealer market. The GFMA itself brings together three leading financial trade associations: The Association for Financial Markets in Europe (AFME) in London and Brussels, the Asia Securities Industry & Financial Markets Association (ASIFMA) in Hong Kong and the Securities Industry and Financial Markets Association (SIFMA) in New York and Washington.

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