The Bank of England (BoE) has published a speech by Sarah John, Head of the BoE’s Sterling Markets Division. The speech is entitled In codes we trust – Redefining the social licence for financial markets.

The speech provides a couple of examples of initiatives that the BoE is involved with which are looking to promote more effective markets. In particular there is a discussion concerning the development of new codes of conduct covering the Global FX and UK Money Markets. Earlier this year three codes of conduct have been launched: the FX Global Code, the UK Money Markets Code and the Global Precious Metals Code. All of these codes are aligned along the same fundamental principles – to promote robust, fair, liquid, open and appropriately transparent markets supported by effective infrastructures. The principles specifically cover: ethics, governance, compliance and risk management, information sharing, execution and settlement practices in the respective markets.

In terms of signing up to these new codes and what this means in practice, the following points are made in the speech:

“What does “signing up” to the codes mean in practice? There are two points I’d like to make here. The first is on the concept of adherence, and specifically what steps market participants should take. The FX Global Code has an accompanying report on adherence, but in my view it applies equally to both Codes. As set out in that report, there are three key steps towards adherence that market participants are encouraged to take: (i) embed the Codes’ principles in your day-to-day practices, (ii) monitor, through time, how effectively you have done so, and (iii) demonstrate your own adherence to the Codes, to counterparties and others. To facilitate public demonstration of adherence, a tailored Statement of Commitment has been developed for each Code. This should provide market participants with an accessible and standardised means of demonstrating Code adherence, without the need to provide bespoke sign offs for different counterparties and service providers. Widespread use of the Statement of Commitment can also help to raise awareness about, and increase the profile of the Codes. I encourage all market participants, including all of you in this room, to use the Statement of Commitment, as we at the Bank will be doing.

The second point I want to make is on the concept of proportionality. When writing the codes we were very conscious that they were going to apply to a diverse group of market participants, and there was unlikely to be a “one size fits all” solution. The appropriate steps for a large sell-side participant to take to align its activities with a given principle will necessarily differ from the appropriate steps to be taken by a small corporate. So the concept of proportionality has been strongly embedded in both Codes. This should make it possible for all market users to align their activities to the Codes in a way that is appropriate for their business.”

View BoE speech on new financial markets codes of practices, 14 June 2017