In a 1999 edition of Profit & Loss, David Clark, now chairman of the European Venues and Intermediaries Association (EVIA), reflected on 30 years in the foreign exchange industry. Now he talks about what has – and hasn’t – changed in the industry since then and makes some bold predictions for the future. Profit & […]
Tag: Global Code of Conduct
Global Code of Conduct
2018 is a big year for the FX Global Code as it will celebrate its first anniversary – a date by which all participants are expected to have adhered to the code’s principles. Will the code be a success? Colin Lambert thinks he has the answer.
It was, and still is, depressing having to read through legal papers and regulatroy notices on a regular basis, all of which deal with misconduct in FX markets, and nobody whould be misguided enough to think that such actions will not continue in the year ahead. They will, and probably the year after that.
There is an upside in having to rake over the ashes of past misdemeanours, however, because it offers a timely and regular reminder of the importance of the FX Global Code.
Let’s start 2018 on a positive note – happy new year everyone. Now…let usual service resume. I don’t know what happened exactly on December 25 when 99.9% of the FX market was shut down, but whatever it was, we probably need to do something about it, because I can’t see how it can be a good thing when the world’s most liquid currency pair decides to spend four hours trading (very occasionally I am told) some 350 points below where it closed.
Hotspot says it has aligned its activities across its global business with the principles of the FX Global Code, issuing a statement of commitment today.
Following a comprehensive internal review, Hotspot says that its business practices, procedures, compliance framework and disclosure standards have been augmented to fully reflect the Code’s principles, as published in May 2017.
The platform has also conducted a series of customer meetings to clarify how Hotspot’s adherence will impact them and their business. These efforts, which started over a year ago and developed as the Code’s drafting progressed, will remain a focus for Hotspot as adoption of the Code increases across the FX community and as its usage starts to further inform industry behaviour.
The European Central Bank (ECB) is publicly endorsing the statement of Commitment set out in the FX Global Code of Conduct and is encouraging FX trading counterparties to do the same.
The FX Global Code is a set of global principles of good practice in foreign exchange markets, developed by central banks and market participants from 16 jurisdictions around the globe in order to promote a robust, fair, liquid, open and appropriately transparent market.
Today the ECB invited FX market participants to publicly commit to the principles set out in the Code by endorsing the statement of commitment annexed to the Code by the end of May 2018.
Saxo Bank has signed up to the FX Global Code of Conduct, which is aimed at improving industry standards and promoting best practice among FX market participants.
To emphasise its support for openness and transparency, Saxo says it has published an “Enhanced Disclosure” that provides insight into broker incentive, broker stability, client leverage and performance.
Kim Fournais, CEO and co-founder, says: “We are proud to have been given the opportunity to participate as a member of the Bank of England’s FX Joint Standing Committee in reviewing and drafting this important and unprecedented industry-wide initiative.”
The hope that peer pressure will help drive adoption of the Global Code of Conduct’s principles is fine, but what the industry also needs is real action to curb some practices that sit uncomfortably with some. Last look is one of them and while last year we had a spate of disclosures that highlighted how firms were hardening their stance on last look, this week has seen one bank – if I am reading this right – take a step further.
I have been stating in recent months that one of the challenges for the FX industry will be promoting the “good news” story that it is reforming itself, while at the same time being on the end of negative headlines around actions that allegedly took place a decade ago.
This week’s headlines around HSBC and the alleged running of stop losses is a case in point, but the accusation from ECU Group against the bank also raises an early question about one of the Global Code of Conduct’s principles.
The Australian Securities and Investments Commission (ASIC) has released a report to coincide with the FX Global Code of Conduct which seeks to redress shortcomings in behaviour as well as to outline good practice on spot FX desks in the Australian market.
The report, which was compiled following an investigation into local banks’ practices and led to fines against the top five Australian banks, says, “We observed a lack of appropriate training and guidance, particularly in relation to handling confidential information, considering client interests and conflicts of interest, and executing stop loss and fix orders. Training sessions were rarely specific or tailored to the role of employees operating in the spot FX market. We also observed that employees frequently engaged in practices which were learned from their peers without question or challenge.”
The Bank for International Settlements’ (BIS) FX Working Group formally launched the full version of the FX Global Code of Conduct today in London, following the release of stage one in New York last year.
The Code contains 55 principles covering areas including ethics, transparency, governance and information-sharing. It also tackles complex topics such as electronic trading, algorithmic trading and prime brokerage.
“All of us recognise the need to restore the public’s faith in the foreign exchange market. We share the view that the Global Code plays an important role in assisting that process and also in helping improve market functioning,” says Reserve Bank of Australia deputy governor Guy Debelle, who chaired the FXWG.