Forex Network Chicago takes place later this month, from September 23-25, you can register here, and in our efforts to keep the events fresh we have introduced two “Ask the Experts” sessions where audience members – and P&L readers – can ask questions of a panel of specialists in their field.
This year’s conference has two such sessions, one on algos and one on the legal minefield that seems to be facing the trading businesses these days and I thought I would focus on the latter, as it remains so important and, thanks to the fines handed down to RBC and TD in Canada, timely.
It will be fascinating to me to see how US-based experts – we have David Yeres, partner at Clifford Chance, Matthew Kulkin, former director of the CFTC’s Division of Swap Dealer and Intermediary Oversight, and Regina Thoele, SVP of compliance at the National Futures Association – tackle the subject of the FX Global Code. I feel comfortable saying that the general feeling in the industry is that Code take up has been better elsewhere than in the US, so one question could be simply to ask why is that?
It was noticeable to me that in its release detailing the actions taken against RBC and TD, the Ontario Securities Commission gave a name check to the FX Global Code because it means that another regulator, while possibly not explicitly endorsing the Code, is referencing it when it comes to any investigations. At some stage this may percolate through to US regulators – we shall see.
On a more legal viewpoint, it might also be interesting to find out what our experts think about the apparent dichotomy of recent events in the US legal systems and the evolution of the Code. Looking at the actions taken by various regulators and classes against banks and individuals it stands out to me that the only case to go the full distance and not be thrown out is that involving a practice that is supported by the Code, whereas the cases that have largely been thrown out involve action that is not.
The Code is specific that dealers shall not share information inappropriately, indeed there was a letter to market participants stating just that in 2001 from the New York FXC and yet individual after individual has been exonerated (rightly in my opinion – the practice was condoned by senior management at the time) for this practice, while one person, Mark Johnson, has had to go through endless days and weeks in court and been in jail (a threat he still faces of course), all because of an order being pre-hedged – a practice any market participant will tell you is vital to the market function and which, subject to the appropriate disclosures, is endorsed by the Code.
These are, of course, only my personal thoughts on one of our Ask the Experts sessions, and following this column I may not be allowed in the room! The intention is of course, for readers and attendees to ask the questions, and the domain knowledge of our experts is much wider than the single issue I focus on, so get your thinking caps on and email anything you have to our special email address for questions at our conferences, email@example.com.