With increased focus on the impending quarter end WM Fix, the Global Foreign Exchange Committee has issued a statement reminding market participants of their responsibilities in what is likely to be a challenging market environment.
In the statement the GFXC says given the intense volatility seen in global financial markets this month, it is possible that FX market participants may execute larger than usual FX volumes during end-of-month benchmark fixings. In addition, FX market participants may face more operational constraints reflecting lockdown in some financial centres.
“In light of these possible developments, significant volatility and price movements may be observed during FX fixings in the coming days,” the GFXC observes.
To reduce the potential impact of this volatility on market functioning, and market participants’ execution outcomes, the committee is encouraging market participants to give appropriate consideration to market conditions and the potential impact of their transactions and orders, as per Principle 12 of the FX Global Code.
It also warns participants to be aware of the risks associated with the transactions they request and undertake, as well as clearly understand how orders will be handled and transacted (as per Principle 9). The same Principle should be observed by participants handling orders, who must do so with “fairness and transparency” according to the Code.
In keeping with Principle 10, participants should also price transactions in a manner that is transparent and consistent with the risk borne in accepting such transactions, as well as exercise particular care and attention when handling orders that have the potential to have sizable market impact. Further they should ensure adherence to internal guidelines and procedures for collecting and handling executing orders.
“In these unprecedented times, we encourage market participants to be aware of how their actions can ensure the FX market remains robust, open, fair and appropriately transparent such that market participants are able to confidently and effectively transact at prices that reflect available market information and in a manner that conforms to acceptable standards of behaviour,” the GFXC says.