It is good to see ACI – The Financial Markets Association
taking such a proactive stance on the Global Code, (see above story), although
given the association’s long standing commitment to best practices through its
own Model Code, one should not be surprised.
If nothing else, ACI’s stance represents a step forward in
the adherence piece of the Code that has been the subject of much discussion;
it also, it should not be forgotten, represents a definable and explicit
benefit of membership of the association.
Exactly how adherence to the Code is to be formally
expressed is yet to be revealed, however most in the industry seem to accept it
will, in some shape or form, involve them affirming that they will be guided by
its principles. The reason I see ACI’s commitment as important is because it has
amongst its members two groups that may not be fully aware the Code applies to
Firstly, in spite of the publicity around it, I still come
across people working for platform providers who are ambivalent about the Code,
seeing it as little to do with them. Well as I remind them every opportunity,
it does apply to them and not only
will their firm (hopefully) be on top of matters when it comes to the adherence
piece, but now, as a member of ACI, they will be expected to affirm their
willingness to adhere individually.
The other major positive from this development comes from
ACI’s presence in local markets. Yes, two or three of the major banks have
offices in all centres and they will no doubt also ensure their staff adopt the
Code’s principles globally, but there are hundreds of banks that have never had
a member sit on an FX committee, have not been actively involved in the
building of the Code, and, quite frankly, have been by-passed by so much of the
trauma to hit the major centres in the last five years.
As is stressed by those leading the effort to develop the
Code, it is a set of principles aimed at the global market, in all centres, not just the top seven or 10. ACI’s
commitment to the Code will ensure that many of these regional centres now
become fully aware of what is required as individuals not only sign up, but
also spread the message within the institution. Hopefully, just as those firms
who have staff sitting on the committees creating the Code will commit to
adherence on an institutional basis, so too will the regional players.
For the Code to be a success it needs this institutional
support, for only that way will it reach the majority of participants, but it
should not be forgotten that it is also requires an individual commitment –
every single participant is responsible for the FX market’s good name.
Of course, there are still sectors of the market that
continue to ignore, or at least pay scant attention to, the Code – not least
some of the smaller private trading firms. These participants – mainly because
they don’t have clients – do not see the need to sign up to a Code that they
perceive is aimed at protecting the customer. This ignores the market structure
element of the Code – for it is also aimed at ensuring a fair and equitable trading
environment for all. This means these smaller firms should adhere, but how do
we achieve that?
One solution is for the trading platforms to follow ACI’s
path and state that if a user of their venues does not explicitly commit to the
Code they are not welcome – but rarely do you see turkeys voting for Christmas!
Another is for the BIS committee to get more industry
associations on board. The smaller private trading firms are represented by the
FIA PTG for example – what chance getting that group to commit its members to
Either way, the message will, hopefully, get through, but
its path can be eased if firms within the industry either impose a charge on
participants that are unwilling to commit, or flat out refuse to deal with them
– as well as if other members’ associations support the Code’s adoption.
Of course, none of this answers the question on many lips –
what to do with future transgressors?
I quite like the idea of reviving the official dealers’ list
idea from the 1980s. The local central bank or other authority can hold the
registration of everyone in the local market that is covered by the Code and
membership of this list is required to take up a position in the industry. If
someone transgresses there is a requirement to report it to the authority and
if it does involve dismissal then the name is removed from the list and they
cannot work in the industry.
Such lists could be transportable so we could, hopefully
(assuming every central bank or authority agrees to adopt the Code), avert
instances of people moving from one centre to another.
As the release of the complete Code nears, the questions of
adherence and enforcement can be answered, and the FX industry can finally move
out of a period of stagnation and return to the vibrant, innovative industry it
has been in the past.
We cannot change what happened in the past, we can only look
forward and seek to shape the future. The Global Code is a major factor in
repairing confidence and could represent a watershed in the market’s
rehabilitation. ACI’s support will hopefully be echoed by institutions and
participants everywhere – and if it is, that future can be a whole deal more