Articles tagged by global code
The past year has seen me become increasingly irritated by platforms answering my call to help police bad behaviour in the Global Code era by saying either it’s not their responsibility or it’s an impossible request - so here's one area they can do something about. There are reasonable reasons for asymmetric price improvement data and - at a stretch - for asymmetric last look policies. But asymmetric response times? That's a whole different matter and something needs to be done now.
Few can be surprised that such an increasingly emotive issue such as last look has led to a lawsuit. As someone who has disliked the practice for more than a decade and written about the risks associated with the regular rejecting of trades for more than seven years this class action lawsuit is not surprising – but I cannot help avoid the feeling that this is both someone trying it on, while at the same time it is the worst case scenario for the defendants.
Before getting onto today’s subject matter – which is last look – I wanted to clarify something from Monday’s column – which was about last look!
Some in the industry are definitely moving towards the moral high ground on this issue and along the way, hopefully, they will squeeze out those that still wish to abuse the practice. New initiatives and growing support for a crucial change mean I am, possibly for the first time, vaguely optimistic the problem of last look will be solved.
The feedback period for Principle 17 of the Global Code - dealing with last look in FX markets - is over and we await the outcome. My understanding is that the outcome will not be as clear cut as many thought just a short while ago, but, sticking my neck on the line, I am happy to predict which way the decision will fall. After all, the legal industry is already circling FX on this issue - why give it more ammunition?
As some one who has long argued we should not think in terms of 'banks' and 'non-banks' when it comes to liquidity providers in FX markets, it may come as a surprise to you that I think there is something fundamentally flawed in how we judge these two segments. There is not a level playing field in terms of compliance and capital requirements, and that was OK for a long while. Now though, the non-banks are hiring salespeople - and that gets my antenna twitching.
The latest P&L Survey is online ahead of our Asian conference swing starting Thursday November 9 in Singapore, through Tuesday November 14 in Hong Kong, ending in Shanghai on Thursday November 16.
To accompany our conference agenda, we have published a short survey for readers to complete – the questions have both a global and regional relevance ranging from liquidity conditions, through execution, to clearing and cryptocurrencies.
Pre-hedging is a hot topic at the moment, not least because of the Mark Johnson trial and the possible ramifications of the jury’s guilty verdict, but what happens when pre-hedging goes wrong? This was one of several interesting questions raised during our Insights call on Thursday last week and is something I’d like to go into in more depth here. What do we do with price improvement as a result of pre-hedging, and more pertinently, what do we do with a loss?
In a speech delivered today to the FICC Markets Standards Board (FMSB) in London, Mark Carney, Governor of the Bank of England (BoE), expressed optimism that new measures aimed at preventing misconduct in the FICC markets are having a significant impact.
These measures, set out two-and-a-half years ago in the Fair and Effective Markets Review (FEMR), are designed to improve confidence in FICC markets after a series of scandals.
“Multiple factors contributed to a tide of ethical drift in FICC markets. Market standards were poorly understood, often ignored and always lacked teeth. Too many participants neither felt responsible for the system nor recognised the full impact of their actions. Bad behaviour went unchecked, proliferated and eventually became the norm,” noted Carney in his speech.
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.
Recycling is a good thing - just ask the environmentalists - but is it a good in FX? Colin Lambert thinks this year, it could be decided that it is not.
The phrase "liquidity mirage" is almost as old as e-FX trading, but it's hard to believe that the originator of that phrase had today's FX market in mind. In 2003, when many of us first heard then Bank of England chief dealer Martin Mallett use the phrase, even the e-world was a very different place. Technology had not yet democratised the industry, non-bank market makers were finding their way in equities and futures markets and yet to really enter FX, and there was a real divide between market maker and liquidity consumer.
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.
Currenex is shifting the focus of its white label business to increasingly target regional and mid-tier banks, citing a number of broader industry-wide trends for this change.
Traditionally, Currenex has focused on selling its institutional grade technology infrastructure to brokerage firms, which then re-brand it in order to provide FX trading services to their own customers.
The most recent example of this is the institutional platform launched by the retail broker Oanda at the start of May, which will utilise a branded version of Currenex’s HTML trading front-end.
The European Association of Corporate Treasurers (EACT) has today launched a register for corporates adhering to the FX Global Code (Code).
Since its drafting phases, the EACT has supported the Code, which was published in May 2017, and is a set of principles that aims to promote a robust, fair, liquid, open, and appropriately transparent market for all market participants.
The EACT’s register is intended for corporate treasury departments that are participating in FX markets as end-users. The EACT register is included in the Global Index of Public Registers.
Shortly after we published the news that Richard Usher, Rohan Ramchandani and Chris Ashton, the three members of the now notorious “Cartel” chat room, were found not guilty of FX market manipulation by a New York court last Friday, my phone started buzzing.
Lots of the activity was WhatsApp messages and phone calls from various industry sources wanting to chime in regarding the decision, and one thing that has been interesting in the intervening time is that my sources seem to be split about whether they’re surprised regarding the outcome of the case.
“I know that they only release choice bits of the chat room transcripts to the public, but what came out looked pretty damning to me. I’m surprised that they’ve been able to get out of this one,” opines one market source.
The FICC Markets Standards Board (FMSB) has published the final version of its Statement of Good Practice (SGP) on Suspicious Transaction and Order Reporting.The FMSB is an independent body set up by market practitioners to try and improve standards of conduct in wholesale FICC markets. It aims to bring transparency to grey areas in the wholesale FICC markets by identifying emerging vulnerabilities, clarifying and documenting practice and agreeing standards to improve conduct and market behaviour. Setting up the FMSB was one of the main recommendations to emerge from the Fair and Effective Markets Review (FEMR), which was conducted by HM Treasury, the Bank of England and the Financial Conduct Authority (FCA).