The Committee for Professionalism (CFP) has issued revisions to the Model Code, inserting a new topic on the use of mobile devices for transacting business; an additional paragraph into the chapter on dealing for personal account; updated Swift codes reflecting the move to the Euro; and a re-wording of the definition of an interest rate collar.
A brief summary of the guidelines are as follows, the full revisions are available on the ACI Website.
5. The use of mobile devices for transacting business.
The use of wireless communication devices (whether they are privately owned or company owned) to transact business, can undermine the controlled environment in dealing rooms with fixed line telecommunication, tape recorded handsets and essential audit trails for all transactions. The dangers lie in unauthorised trades by authorised or unauthorised personnel on or off premises, non voice-logged transactions, the potential misuse of confidential information and legal and contractual risks in the absence of an e-law framework.
Management should have a clear written policy regarding the use of these devices by trading, sales and settlement staff.
The policy guidelines should stipulate amongst other monitor and control measures:
Whether privately and/or company owned devices can be used inside the dealing room and back office to transact, advise or confirm transactions
Whether privately and/or company owned devices be allowed inside the dealing room
Terms, conditions and under which circumstances the use of such devices can be authorised by management
Procedures to allow an end-to-end transaction audit trail, including where appropriate, call back or answer phone facilities and controls
The use of wireless communication devices within the front or back offices for official business, except in an emergency or disaster recovery situation or specifically approved by senior management is not considered good practice.
6. Dealing for personal account
Where dealing for personal account is allowed, management should ensure that adequate safeguards are established to prevent abuse or insider dealing in any form. These safeguards should also reflect the need to maintain confidentiality with respect to non-public price sensitive information and to ensure that no action is taken by employees, which might adversely affect the interests of the firm’s clients or counterparties.
Managers should be aware that a conflict of interest may arise if traders are permitted to deal for themselves in those commodities, instruments or products closely related to the ones in which they deal for their institution and should stipulate clearly which ones, if any, the dealers can trade in for their own account.
In this respect, where dealing for personal account is permitted, management’s written procedures should clearly stipulate the institution’s control policy in relation to the unprofessional practice often referred to as ‘front running’. This arises where an employee could execute a personal trade in advance of a client’s or institutional order to benefit from an anticipated movement in the market price following the execution of a large trade.
Traders should recognise that they too have a responsibility to identify and avoid conflicts of interest.
Chapter XI – Market Terminology.
In this chapter, the CFP has re-worded the definition of an interest rate collar, inserting the following:
A zero cost collar is one where the premium payable on purchasing the interest rate cap or floor is equal to the premium received from selling the opposite position.