FX Global Code of Conduct Launched, Boost by Industry Support

The FX Global Code of Conduct has been officially released with the support of the majority of the forex industry including big market players.

The new rules are composed of 78 pages of 55 principles presented. These principles provide rules for dealing with the procedures of sharing information, processing transactions, and ethical governance of business. The initiative to create a an industry-wide code of conduct was first launched last 2016 under the supervision of the Bank of International Settlements.

According to the Bank of International Settlements, the administration and maintenance of the principles presented in the paper will be done by the Global Foreign Exchange Committee (GFXC).

The Bank of International Settlements is run by the Foreign Exchange Working Group (FXWG) and is composed of 16 major central banks. In collaboration with a group of private sector market participants through consultations, the paper was published under the chairmanship of CLS Bank International’s David Puth.

Puth commented on how the paper aims to recover the trust in the forex industry. He said, “The public perception of financial markets, deeply shaken by the financial crisis of 2008, was made worse by certain behaviors in the foreign exchange (FX) market. To help restore trust in the FX market, the industry has come together around a set of common principles and best practices – the FX Global Code. The Code is about how we can build a stronger marketplace, by working together across the public and private sectors to identify the best practices for the industry. From the outset, we sought to develop the Code in a collaborative manner. This has been a defining factor in ensuring that it reflects good market practice and is embraced by the broadest number of market participants.”

In a statement by the Bank of International Settlements, they explained how the GFXC will work to uphold global conduct. They said, “Broadly, the GFXC will seek to promote collaboration and communication among local foreign exchange committees and other jurisdictions with significant FX markets. It will also provide a forum for the exchange of views on market trends and developments.”

Despite initial reactions of doubt from media organizations who are questioning the principles if put in practice, the paper was gladly received by multiple financial institutions including UK’s Financial Conduct Authority (FCA).

The FCA responded, “The FCA welcomes today’s publication of the FX Global Code. As we set out in our mission, standards can be a useful way for the industry to police itself in support of our regulatory work, and can help firms to communicate expectations of individuals when linked to the senior managers and certification regime. We expect firms, senior managers, certified individuals and other relevant persons to take responsibility for and be able to demonstrate their own adherence with standards of market conduct.”

The Life Insurance Association of Singapore (LIAS) also expressed their approval saying, “LIA Singapore encourages all member companies to evolve their foreign exchange practices to be consistent with the principles outlined in the set of principles of good practice for global FX markets.”