Articles tagged by Code of Conduct
In a release to accompany a new survey
taken by the firm, LMAX Exchange casts doubt on the ability of the FX Global
Code of Conduct to deliver industry reform in a timely fashion.
While noting that the first release ...
Profit & Loss talks to Marshall Bailey, president of ACI -
The Financial Markets Association, about the implementation of the Global Code
of Conduct within the FX industry.
Profit & Loss: One of the biggest concerns
that is always brought up regarding ...
The man responsible for guiding the new foreign exchange markets' Global Code of Conduct, Guy Debelle, has been named as deputy governor of the Reserve Bank of Australia as part of the changes taking place as current governor Glenn Stevens steps down in favour of new incumbent Philip Lowe. Lowe was named as the new governor in May and has welcomed Debelle’s appointment as he steps up from assistant governor (markets), where part of his work was heading the BIS FX Working Group
What is widely seen as one of, if not the, biggest challenge surrounding the BIS FX Working Group’s work on developing the Global Code of Conduct – adherence – was addressed by Chris Salmon, executive director, Markets at the Bank of England earlier this week and Salmon – the man responsible for the adherence piece in the Code – was optimistic that it would be effective.
Addressing ACI UK’s Square Mile Debate, Salmon noted, “It is no secret that all has not been well in FX or FICC markets more generally.”
He cited the erosion of trust in markets to preface his speech but identified an “ethical drift” resulting from “structural weaknesses” that presented opportunities for misconduct.
Nothing says “tick box society” to me more than the world’s obsession with data and being able to quantify, and therefore justify, everything. We have finally reached the point where we have stopped doing the right thing by people because it may leave a couple of boxes un-ticked. There is a lot of attention paid to righting the industry's wrongs but too little attention is paid, in my view, to the psychological impact of reform. The FX industry has psychological scars that need healing.
Bank Negara Malaysia is issuing a policy document on a proposed Code of Conduct for Malaysian wholesale financial markets “to uphold professionalism and integrity in the financial markets”.
The draft sets out principles and standards to be observed by market participants in the Malaysian wholesale financial markets, including FX and money markets. It also outlines the administrative, civil and criminal actions that may be undertaken by Bank Negara on misconduct
Market participants are invited to provide written feedback on the draft, including suggestions on areas requiring further clarity and alternative proposals that Bank Negara should consider, ahead of a proposed release early in 2017.
Colin Lambert has retrieved the trusty Profit & Loss Crystal Ball from the dark recesses of the office, given it a wipe, and peered into the future to produce 10 predictions for 2017.
There is little doubt that as an industry foreign exchange is a more optimistic place than it was just 12 months ago – and hopefully the majority of themes in this year’s Crystal Ball reflect a more upbeat message.
es, the coming year will not be without the challenges of legal battles that have dogged the industry for the past three years, but if nothing else the shock factor has worn off and most people see what is happening as the continuation of a long process.
In the interests of total transparency we also, as usual, cast our eye over last year’s predictions to see how they went. As always, these predictions will be viewed through rose-coloured spectacles to ensure we look as good as possible!
We kicked off last year’s predictions by suggesting the entire FX world would take a more realistic view of developments – that liquidity and spreads would reflect this thought process, and that market share would be a declining influence in business decisions.
XTX Markets has made XTX-ray, a tool designed to replicate how sell-side market makers analyse spot FX liquidity, available to buy side market participants.
XTX-ray looks at a wide range of data, including fill ratios, the cost of rejected trades in USD, spreads and market impact, to reveal “hidden” costs embedded in firms’ spot FX execution with the aim of enabling them to more effectively analyse the liquidity they are accessing.
“XTX-ray makes state-of-the-art sell side execution analysis available to buy side firms, and counterparties will be able to evaluate the execution quality of their liquidity providers.
The financial markets industry has another code of conduct to confirm with after the Bank of England released its new, voluntary, UK Money Markets Code, which sets out the standards and best practice expected from participants in the deposit, repo and securities lending markets.
The Code is underpinned by the key principle that participants should always act in a manner to promote the integrity and effective functioning of these markets. It also outlines six high-level principles encompassing: ethics, governance, risk management, confidentiality, execution and settlement.
Pragma Securities has expanded its algorithmic trading platform, Pragma360, to include NDF products.
While the latest Bank for International Settlements (BIS) survey in 2016 showed that spot FX trading was down 19% compared to three years previous, it also showed that the NDF market grew by 5.3% over the same time period.
The growth of the NDF market, as well as the fact that these products increasingly trade electronically, is what prompted Pragma to start offering algorithmic tools for trading them, Curtis Pfeiffer, chief business officer at Pragma, tells Profit & Loss.
Guy Debelle, deputy governor of the Reserve Bank of Australia and chair of the FX Working Group responsible for producing the Global Code, discusses his hopes and ambitions for the much-awaited document with Colin Lambert.
Colin Lambert: May 25 sees the full Code released after two years of work, what is your message to the wider market that is seeing it in its entirety for the first time?
Guy Debelle: I would like to stress that this has very much been a public/private endeavour to move the FX market to a better place by providing guidance around what constitutes good practice.
May 25 marks the release of the full FX Global Code of Conduct, an event that has been much anticipated in FX circles. What will the Code bring to the FX industry and what are the key changes likely to be experienced by participants? Colin Lambert finds out.
It all starts – and to a degree ends – with Annex Three, which sits at the end of one of the more important documents released in the FX industry. A lot has been debated and speculated over as the FX Code of Conduct has been developed by the Bank for International Settlements’ FX Working Group
Profit & Loss talks to David Puth, CEO of CLS and Chairman of the Market Participants Group (MPG), about how the FX Global Code of Conduct will work.
Profit & Loss: What was the process like to develop the Code from start to finish? Were there challenges in achieving consensus amongst so many different market participants?
David Puth: The development of the Code has generally been a constructive process. The committees involved in its creation are: the FX Working Group (FXWG), which is the central bank working group; the Market Participants Group (MPG), which is the group that I chair; and a number of industry groups, including regional FX committees.
There is one area of the Global Code of Conduct that continues to attract controversy, and, Colin Lambert says,
we all know what it is…
Although the assessment is a little harsh given the type of misconduct that led to the creation of the FX Global Code of Conduct, it is hard not to understand where the head of e-FX trading at a major bank in London is coming from when they note, “The Code had one job – give us clarity on last look – and it has failed miserably.”
There remains the odd voice still raising concerns about Principle 11 and its apparent endorsement of pre-hedging, however, Guy Debelle, chair of the FX Working Group that created the Code, stresses this Principle is really about the “demonstration effect”.
Although most of the attention is on institutional adherence to the Code of Conduct, Colin Lambert suggests there is also a great deal that individual employees need to know.
It was one of the first challenges identified by those creating the FX Code of Conduct – how do we get the message out there? It is not just about ensuring that all firms that operate in the foreign exchange industry understand their responsibilities under the Code – individuals too have responsibility.
It was notable, talking to people this time last year, how few were concerned about the Code’s impact upon them.
On the day that the second and final phase of the FX Global Code of Conduct was released, panellists at Forex Network New York debated whether it puts an unnecessary burden on buy side firms.
Philip Weisberg, a member of the Market Participants Group (MPG) that helped craft the Code, stated that it “puts an enormous responsibility on the buy side”.
Giving an example of this responsibility, he pointed to last look, a practice that some platforms do not allow and others allow to be implemented in a variety of ways. The platforms must disclose their last look policies, meaning that buy side firms need “to have some type of framework for evaluating the efficacy of a venue or liquidity provider choice or execution choice”, Weisberg explained.
When I joined a US investment bank in London as a graduate trainee in 1969, it was explained to me that they did not actually have a graduate programme nor were they particularly interested in the economics and politics that I had spent three years studying.
I had been hired because I had a sound education and they believed, after several interviews, that I had the qualities of honesty and integrity that they insisted on for all employees, at all levels of job function and experience.
“Prime Brokerage Participants should strive to monitor and control trading permissions and credit provision in Real Time at all stages of transactions in a manner consistent with the profile of their activity in the market to reduce risk to all parties.” – Principle 41
Prime Brokerage Participants should strive to develop and/or implement robust control systems that include the timely allocation, monitoring, amendment, and/or termination of credit limits and permissions and adequately manage associated risks.
• Prime Brokerage Clients should strive for Real-Time monitoring of their available lines and permitted transaction types and tenors so that only trades within permitted parameters are executed.
It wouldn’t be the modern day FX market if the year didn't kick off with legal issues and 2018 is no different. What is different this year is that they could, conceivably, pull the curtain down on a sorry saga and provide critical direction on two grey areas in the industry.
There have been regulatory fines handed down regarding last look but as far as I can tell a case currently being heard in London is the first where an employee is claiming they were dismissed largely because of their use of the practice.
Ian Battye, chief investment officer, currency, at Russell Investments, talks to Profit & Loss about the next steps for driving the adoption of the Global Code of Conduct within the FX industry.
Profit & Loss: The FX Global Code of Conduct has obviously been a big initiative within the industry, but how much do your clients – the asset owners – know about it?
Ian Battye: Perhaps a little disappointingly there isn’t a great knowledge of even its existence amongst asset owners. That’s why at the moment we’re trying to help create a level of awareness around the Code by explaining why we have signed up to it.
Record Currency Management has signed both the FX Global Code and the Local Government Pension Schemes (LGPS) Investment Code of Transparency.
“Both of these codes are fully aligned with Record's position as an independent currency manager, acting solely on our clients' behalf, and promoting the highest standards of transparency and market conduct,” says the firm in a release issued today.
The FX Global Code is a set of principles of good practice in the foreign exchange market that has been developed in partnership between central banks and market participants.
A new survey from Bloomberg suggests that authorities in Mexico may face an uphill struggle when promoting the FX Global Code of Conduct amongst the local market.
In the survey, which Bloomberg says more than 100 financial professionals in Mexico participated in, 39% of respondents said that they will not endorse the Code. This is in comparison to 40% who said that they are reviewing the Code, 8% who said they have signed the letter of commitment to the Code’s principles and 12% that said they have implemented Code training.
"What the survey results tell us is that many people still do not understand what the FX Global Code of Conduct is and does," said Mariana Suarez, Bloomberg's Head of Sales for Mexico and Central America.
David Puth, Vice Chair of the Global FX Committee (GFXC), will be completing his term in this role with the group he helped form next month.
Puth, who is the CEO of CLS Group, has been heavily involved in the creation of the Global Code, the first iteration of which was released in May 2016, and then published in its final form in May 2017. Firms were anticipated to commit adherence by around the one-year anniversary in May.
When work on the Global Code first began, it was in the form of a public/private sector partnership, with Puth leading the private sector side through the Market Participants Group (MPG), which worked together, but separately, with the public sector side, led by the Reserve Bank of Australia’s Deputy Governor Guy Debelle.
Neill Penney, co-head of Trading at Thomson Reuters, will serve as the London Foreign Exchange Joint Standing Committee’s (FXJSC) private sector representative on the Global Foreign Exchange Committee (GFXC).
The FX Global Code was launched in May 2017 to promote integrity, fairness, transparency and effective functioning of the global foreign exchange markets. Alongside the launch of the Code, the GFXC was established to promote and maintain the Code and to facilitate communication between local foreign exchange committees around the world, each of which appoints two members to the GFXC, one from the private sector and one from the public sector.