The Financial Stability Board (FSB) has published a progress report on the implementation of its September 2014 recommendations for reforms to foreign exchange (FX) benchmarks.

The overall assessment of the report is that there has been good progress in implementing many of the September 2014 recommendations, although on some, the progress has been mixed. In particular, the FSB notes that it’s worth re-emphasising that the recommendations are intended to apply to all FX benchmarks, to ensure more widespread implementation.

Key points from the report include that:

  • useful steps have been taken to reform the methodology of the widely used benchmark WM/Reuters (WMR) 4pm London fix, though there is scope for further progress on reforms in this area;
  • recommendations to support more transparency in customer pricing for fixing transactions have seen good implementation among the largest market participants and for the most used benchmarks, but elsewhere there is scope for further improvement. Similarly, steps to separate dealers’ fixings business from other activities are being taken by the larger participants and in the most active markets, but again there is room for further implementation in other areas of the FX market;
  • work is underway to improve market conduct practices, both within individual firms and through market-wide initiatives, including the global effort underway to develop a single code of conduct for the FX market through the Bank for International Settlements Markets Committee working group on FX markets; and
  • while many index providers and end-users have increased their focus on the due diligence around FX benchmark use, there is scope for greater follow-through on this on the part of some market participants.

The FSB will continue to monitor progress in this area, and work with authorities and industry bodies as needed to ensure continued enhancements to FX benchmarks and related activity.

View FSB releases progress report on FX benchmark reforms, 1 October 2015