Basel body releases global code for FX market

MANILA, Philippines - The first phase of the Global Code of Conduct for the Foreign Exchange Market, as well as principles for adherence to the new standards, were released by the Foreign Exchange Working Group (FXWG) recently.

“In a globalized world, the foreign exchange market is one of the most vital parts of the financial plumbing,” Guy Debelle, FXWG chairman and assistant governor of the Reserve Bank of Australia, said.

“One of the guiding principles underpinning our work is that the Code should promote a robust, fair, liquid, open and transparent market,” he added.

The FXWG was set up in July 2015 and operates under the auspices of the Markets Committee of the Bank for International Settlement (BIS). The group’s membership covers major financial centers in both advanced and emerging market economies, and its work is supported by the private sector Market Participants Group.

Officials said it was 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 Global Code is organized around six leading principles. They are:

•  Ethics: Market participants are expected to behave in an ethical and professional manner to promote the fairness and integrity of the FX market.

•  Governance: Market participants are expected to have robust and clear policies, procedures and organizational structure in place to promote responsible engagement in the market.

•  Information Sharing: Participants are expected to be clear and accurate in their communications and to protect confidential information to promote effective communication that supports a robust, fair, open, liquid and appropriately transparent market.

•  Execution: Participants are expected to exercise care when negotiating and executing transactions in order to promote a robust, fair, open, liquid and appropriately transparent market.

•  Risk Management and Compliance: Participants are expected to promote and maintain a robust control and compliance environment to effectively identify, measure, monitor, manage, and report on the risks associated with their engagement in the market.

•  Confirmation and Settlement Processes: Participants are expected to put in place robust, efficient, transparent, and risk-mitigating post-trade processes to promote the predictable, smooth, and timely settlement of transactions in the market.

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.