The Bank for International Settlements (BIS) has published a speech given by Guy Debelle (Assistant Governor (Financial Markets), Reserve Bank of Australia) concerning the development of the global code of conduct for the foreign exchange market (the Code).

Key points in Mr Debelle’s speech include:

• work to develop the Code commenced in May 2015 when the BIS Governors commissioned a working group of its markets committee to facilitate the establishment of a single global code of conduct for the wholesale foreign exchange (FX) market and to come up with mechanisms to promote greater adherence to the Code;
• the Code is global and is intended to cover all of the wholesale FX industry;
• work on the Code is split into two phases. The first phase covers areas such as ethics, information sharing, execution (including mark-up) and confirmation and settlement. The second phase covers topics such as governance, risk management and compliance, as well as further aspects of execution including e-trading and platforms, prime brokerage and the unique features of FX swap, forward and option transactions;
• adherence to the Code will be voluntary. The Code will not impose legal or regulatory obligations on market participants, nor will it supplant existing regulatory standards or expectations;
• three principles will underpin the overall approach to adherence: (i) the Code will apply to all wholesale FX market participants, based on the activities they undertake and subject to compliance with any applicable regulations; (ii) how wholesale FX market participants adhere, and demonstrate their adherence to the Code should be proportionate and appropriate to the type of participant and the context of the local financial markets; and (iii) the mode of adherence should be transparent, enabling monitoring and market discipline;
• last week the second draft of phase one of the Code was circulated to various foreign exchange committees. Comments will be gathered over the next week or so. A revised draft will then be circulated in early April. There will then be one final round of ‘fatal flaw’ comments before seeking endorsement by various foreign exchange committees which can then be taken to the Global Foreign Exchange Committee meeting in New York on 25 May 2016; and
• the intention is that the complete Code will be released following the Global Foreign Exchange Committee meeting in London in May 2017.

View The global code of conduct for the foreign exchange market, 17 March 2016