BIS FX Working Group update on second phase of FX global code of conduct

The Bank of International Settlements (BIS) has published a speech by Guy Debelle, Reserve Bank of Australia Deputy Governor, on the global code of conduct for the foreign exchange market. Points of interest in Mr Debelle’s speech include:

• the Foreign Exchange Working Group (FXWG) has provided market participants with a number of opportunities to comment on a draft version of phase 2 of the code. It will shortly be sending out a “fatal flaw” version of the complete code for comment. Distribution to market participants will be principally through the various FX committees (FXCs), but also through other industry associations. The aim is to ensure all perspectives are appropriately reflected in the code;
• the complete code will be released in London at the end of May 2017;
• the code will need to be accepted and endorsed across the full spectrum of market participants. Alongside the drafting of the code, the FXWG has been considering how to ensure its widespread adoption;
• the first dimension is market-based adherence mechanisms. Adherence to a voluntary code will only happen if firms judge it to be in their interest, and take practical steps to ensure the code is embedded in their practices, such as training staff and establishing appropriate policies and procedures. In addition, the global FXCs issued a joint statement of support at the launch of phase 1 of the code, signaling their intention to make adherence to the code a likely requirement of FXC membership. This would ensure the code is embedded at the core of the FX market, but it is also important it extends beyond that, so that, at the very least, there is an awareness of it across all market participants;
• the second dimension of adherence is that the BIS central banks have signalled their commitment to the code by announcing that they themselves will follow it, and that they expect that their counterparties will do so too;
• the third dimension of adherence is that the FXWG is talking to regulators in various jurisdictions as to how they might use the code in monitoring market conduct. This includes the UK, where the FCA is considering how it might incorporate the code in the senior managers regime; and
• the process does not end with publication of the complete code. As the FX market continues to evolve, the code will need to evolve with it.

View BIS FX working group update on second phase of FX global code of conduct, 1 February 2017