Global Code of Conduct for FX Market Finally Released

Currency TradingThe much-awaited wait is finally over as finally the global code of conduct for the forex market has finally been released on 25th of May, 2017. The Bank of International Settlements’ Foreign Exchange Working Group (FXWG) has prepared the FX Global Code of Conduct. The group comprises of 16 major central banks. During this process, a group of private sector market participants headed by David Puth was consulted.

There are 55 principles included in the code and it emphasises on crucial aspects of information sharing, ethics, transparency and governance. Since the Global Code of Conduct cannot be enforced as it is not regulated, several organisations have backed it and urged for its adaptation.

Guy Debelle who is the Deputy Governor of Reserve Bank of Australia and head of FXWG has made the following statement:

All of us recognise the need to restore the public’s faith in the Foreign Exchange Market. We share the view that the global code plays an important role in assisting that process and also in helping improve market functioning.

The idea for creating the code was realised after the foreign exchange scandal in 2013 where it was found that the currency dealers were involved in rigging benchmark rates and were front-running orders.

LMAX Exchange

There is another contributory reason which mentions the use of “last look” that allows traders to exit the currency trade after learning about the intention of the other parties possibly through unfair means involved in the trade.

Thomson Reuters and SWIFT that are key market participants are in support of the new global code for the forex market. The chief operating officer of SPOT Foreign Exchange electronic trading platform ParFX, Roger Rutherford believes that the new code will have the transparency of trade between the parties.

Karim Haji of KPMG consulting firm is also in support of the new code and states that it is an important step taken for the building of trust in global FX market that handles daily trade volumes in excess of $5 trillion.

The Chief Executive Officer of LMAX Exchange David Mercer believes the new code to be practical and it should be used in areas of pre-trading hedge and last look. He has further stated that amendments can be added in future because the working groups are planning to continue consulting the market.

The code of conduct will also look into regulating the algorithmic trade. Under this, the service providers will have to provide additional information disclosure related to the operation. In order to promote and support the principles of the global code of conduct, a Global Foreign Exchange Committee has been set up that will include public as well as private sector representatives.

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