On 6 December 2018, the Bank of England (BoE) published a speech by Andrew Hauser, Executive Director, Markets, on why the buy-side should adopt the FX Global Code (the Global Code). The speech includes a Q&A addressing the key uncertainties the buy-side has expressed with the Global Code.

The speech also includes the following points:

  • take up of the Global Code, which is voluntary, has increased rapidly. The number of statements of commitment in reference to the Global Code have risen from 100 in April 2018 to 605 in November 2018. This includes 41 central banks, including the BoE;
  • a table included within the published speech highlights that all of the 30 largest firms by asset size have signed up to the Global Code;
  • take up by the buy-side has been slower, although 11 out of the 30 largest asset managers (accounting for over $17 trillion USD of assets) have committed to the Global Code;
  • there is a misconception that the Global Code is not relevant to buy-side firms – many parts (including ethics, governance, and risk management and compliance) are directly applicable;
  • the Global Code is evolving: principle 17 was updated in December 2018 (concerning trading activity that utilises information from a client’s trade request during the last look window), and since its adoption it is reported that hold times and reject rates have fallen materially since the change;
  • a key ‘selling point’ for the buy-side adoption of the Global Code include that when the senior managers’ regime comes into force at the end of 2019, behaving in accordance with the Global Code will help senior managers demonstrate proper conduct; and
  • the UK Investment Association is finalising with its members a guide intended to assist firms navigate their own assessment of the Global Code’s requirements against existing requirements.

The speech concludes with the following comments:

“If there was one lesson of the financial crisis ten years ago, it was the importance of the market taking collective responsibility for raising and maintaining standards in financial markets, of which foreign exchange forms a vital part. Buy-side firms, as huge and growing players in those markets, have a vital role to play in that. By signing up to the Global Code, you signal a commitment not just to uphold those standards yourselves, but also to hold others to them – and in so doing help ensure the markets remain deep, liquid, safe and fair to everyone. Over the coming year, the Global FX Committee and the broader international community will be working towards bringing the level of signup to the Global Code on the buy-side towards that seen on the sell-side. Please join us in that campaign.”