FX market urged to adopt Global Code

Despite having no legal obligations, FX market participants are expected to fully comply with the Global FX Code of Conduct.

The FX Global Code must be adopted across the industry despite participants not having legal or regulatory obligations to do so, according to Deputy Governor of the Reserve Bank of Australia.

Guy Debelle - who also heads up the Bank of International Settlements (BIS) FX working group - addressed delegates at TradeTech FX and explained the code is not just for the sell-side, but also the buy-side, non-bank participants and platforms.

“It will not impose legal or regulatory obligations on market participants, nor will it supplant existing regulatory standards or expectations. But we do expect the principles in the Code to be understood and adopted across the entire FX market,” he said.

Debelle added firms must take practical steps such as training staff and putting in appropriate policies and procedures to ensure compliance.

He also stressed the Code is principles-based rather than rules-based because “rules are easier to arbitrage than principles.”

“Clearly, that has been an issue with the various existing codes that have been in place in a number of markets over many years. It is evident that they were ignored on occasion, wilfully or otherwise,” Debelle said.

BIS released its Global FX Code of Conduct to establish a “common set of guidelines” for market participants.

The rules are organised into six principles; ethics, governance, information sharing, execution, risk management, and confirmation and settlement processes.

BIS said market participants are “expected to behave in an ethical and professional manner to promote the fairness and integrity of the FX market.”

FX Scandals led to mass fines across investment banks, with Bank of America, UBS, RBS, JP Morgan, Citigroup and Barclays paying a combined $5.6 billion to settle allegations of rigging foreign exchange markets.

The FX Global Code is on track to be released in May this year.