Buy-side heavyweights continue to snub FX Global Code of Conduct

Vanguard, Allianz Global Investors and AXA Investment Managers among the large buy-side firms still not committed to the FX Global Code of Conduct.

The Bank for International Settlements (BIS) markets committee has thrown shade at larger asset managers for continuing to avoid adoption of the FX Global Code of Conduct.

Jacqueline Loh, chair of the BIS markets committee, summarised in an open letter to Guy Debelle, chair of the global FX committee (GFXC), that a growing number of firms have agreed to adhere to the FX Global Code, but larger buy-side firms remain reluctant to sign up.

“To date, only a fraction of the largest buy-side participants, such as asset management firms, have adopted the Code. As their share in global FX trading increases further, it is important that they adopt the Code to ensure a fair and effective FX market for all,” Loh wrote.

According to the public register of firms that have formally agreed to adopt the FX Global Code, some of the world’s biggest asset managers, including Vanguard, Allianz Global Investors, BNY Mellon Investment Management, Aberdeen Standard Investments and AXA Investment Managers, have still not agreed to comply with the FX Global Code of Conduct, which came into force in 2017. 

At the same time, however, every one of the 30 largest sell-side institutions have signed up and agreed to follow the Code, including Goldman Sachs, HSBC, JP Morgan, Citigroup, Barclays and Societe Generale. Although, JP Morgan Asset Management and Goldman Sachs Asset Management have also not agreed to the terms.

Major buy-side firms had previously expressed frustration at being urged to comply with the FX Global Code, referring to it as ‘regulation in disguise’ and more relevant to the sell-side. The unclear business case for compliance, alongside lack of relevance and concerns that the Code does not go far enough to curb activities such as last look practices and disclosures, have been highlighted as the main issues. 

“While the GFXC has been actively encouraging buy-side adoption through various initiatives, it could explore additional ways to further embed the Code, e.g. to mobilise public authorities and market participants to make the case for signing up at the most senior levels of buy-side firms,” Loh added in the BIS markets committee letter.

The FX Global Code of Conduct officially launch on 25 May 2017, but it does not impose a legal or regulatory obligation for compliance. Instead, it outlines 55 principles to address a variety of major issues including ethics, governance, execution, information sharing, risk management, compliance, confirmation and settlement, as a set of guidelines for FX market participants.