Global FXC Publishes Initial Guidance on Adherence Registers

One of the key issues raised during the creation of the
Global FX Code concerned adherence – how were market participants to know that
their counterparties had adopted the Code? This was especially pertinent given
how a group of central banks and, provisionally, members of the Market
Participants’ Group has committed to not dealing with firms that didn’t sign

Part of the solution came with the publication – along with
the full version of the Code – of a Statement of Commitment that market participants
were expected to sign within one year. At the same time as the Statement of
Commitment was issued, ideas were being touted around of a central registry
that participants can access to ensure their counterparties were Code adopters.

Profit & Loss
understands that several initiatives are underway to develop regional registers
that may feed into a global repository and further that at least three banks
have already signed the Statement of Commitment, with several more going
through the necessary motions to ensure they are actually able to monitor
conduct within the institution before signing.

Against this background, the recently-formed Global Foreign
Exchange Committee (GFXC) has published initial guidance on the establishment
of registers.

The GFXC stresses it supports market-led mechanisms that
raise awareness of the Code and aim to promote its widespread adoption by
market participants. To this end, it adds it is aware that some market
participants have expressed interest in the creation of and having access to public
registers which would facilitate market participants making their use of the
Statement of Commitment public, and their attendant recognition of, and
commitment to adopting the good practices set forth in the FX Global Code; as
well as to assist interested parties in identifying market participants that
have done so.

The GFXC says it anticipates that public registers could be
established using a variety of operating models. For example, one model might
be a website which lists those market participants that have self-published
their Statement (for example, on their own website) and provide a link to the
Statement. An alternative model might host market participants’ Statements,
however the GFXC states it takes no view on the most appropriate operating

The guidance takes the form of a short set of non-binding
considerations as to the recommended characteristics of a public register that
would most effectively achieve the aforementioned purposes.

The GFXC says that should multiple registers develop over
time, it will consider establishing and hosting a Global Index of Registers,
likely accessible via the GFXC website, that will provide a link to all
participating public registers.

The GFXC says it considers that public registers should be
established with the overarching objective of increasing the transparency
around market participants’ use of the Statement. As such, in providing a platform
for market participants to make public their use of the Statement, public
registers should make it clear to users what a market participant’s presence on
the public register represents and what reliance should or should not be placed
upon a market participant’s inclusion on the public register.

The committee adds it does not expect public registers to
assume responsibility for verifying the accuracy or validity of a market
participant’s Statement; monitoring adherence to the Code by market participants
listed in the register; or verifying whether market participants are within the
defined scope of market participants covered by the public register.

With this in mind, the GFXC says it has considered possible
features of public registers from the perspective of both market participants
that may wish to be included on the public register and users that may wish to
identify market participants included on the public register, in providing the
non-binding recommendations.

The recommendations state that public registers should
consider providing fair and open access to those that may
wish to use the public register to identify market participants included, as well as – s
ubject to the operating model adopted – make the
following details publicly available regarding the Statement; market
participant name, Statement date and market participant type; admission date of
the market participant to the public register; and a link to the market’s participant’s
Statement (as hosted by the public register, or as published elsewhere e.g.
market participant’s website).

Further, the GFXC says a register should:

  • Clearly set out the
    process by which market participants are admitted to or removed from the
    public register.
  • Clearly set out how a
    market participant’s inclusion on the public register is maintained through
    time, including how frequently a market participant might renew their
    Statement and expectations for how future updates to the Code will be
    taken account of, for example, whether renewal of the Statement is
    required following a comprehensive review of the Code.
  • Define the scope of
    market participants that are eligible to be admitted to the public
    register (for example, whether all market participants are eligible or
    whether the public register only applies to a specific jurisdiction or
    market sector).
  • Provide a link to the
    Global Index (if relevant).

The committee adds that public registers may also
consider developing a search function to enhance usability.

In the event that a Global Index is established by the GFXC,
it is expected that alignment with the recommendations above will be a relevant
factor for determining a public register’s eligibility for inclusion.

“Initial feedback to the GFXC suggests that multiple
entities, both from the public sector and private sector, may have interest in
establishing a public register,” the GFXC says. “Multiple registers may be able
to capture a larger cross section of FX market participants given the diversity
of the wholesale FX market.

“In order to support a more comprehensive view across
different registers, the GFXC will consider establishing a Global Index,” it
continues. “In considering the establishment of a Global Index the GFXC is in
no way discouraging others from developing such a service. The GFXC’s initial
thinking is that the Global Index will not provide the names of individual
market participants, but will provide a list of and links to each of the public
registers that are aligned with the aforementioned recommendations.

“The GFXC may also explore providing a search functionality,
whereby members of the public could search for institutions across all public
registers that provided the GFXC with the ability to include the registers’
contents in the search function,” it adds. “The Global Index will not collect
or publish Statements from market participants. In addition, the Global Index
(and hence the GFXC) will not assume any responsibility in (a) verifying that
the information contained in the framework of public registers is accurate,
true or reliably reflects the circumstances of any market participant, (b)
monitoring adherence by the market participants that are listed in the
framework of public registers, or (c) verifying whether market participants are
within the defined scope of market participants covered by the public register.”

Reinforcing its stance that it does not wish to be responsible
for the local registries, the GFXC says it anticipates working constructively
with entities that establish public registers and wish to be included in the
Global Index. This may involve standardising certain details provided by individual
public registers to facilitate an effective global search function across
multiple registers, it adds.



Colin Lambert

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