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Global Code For Forex Market Has Finally Been Released

The much-awaited global code of conduct for the foreign exchange market was released on May 25. The FX Global Code of Conduct has been developed by the Bank of International Settlements’ Foreign Exchange Working Group (FXWG) which consists of 16 major central banks. A group of private sector market participants, headed by David Puth of CLS Bank International, was also consulted during the process.

The code includes over 55 principles that address important aspects like governance, ethics, information-sharing and transparency. Although the FX Global Code isn’t enforceable as it is not regulation, it has been backed by several key organizations worldwide who have urged its adoption.

In a statement Guy Debelle deputy governor of Reserve Bank of Australia and head of the FXWG said,

All of us recognize the need to restore the public’s faith in the foreign exchange market. We share the view that the global code plays an important role in assisting that process and also in helping improve market functioning.

The impetus for creating the code came after the 2013 foreign exchange scandal where it was revealed that currency dealers were rigging benchmark rates and were front-running orders.

LMAX Exchange

Another contributory reason is that the practice of ‘last look’ which allows traders to exit a trade after learning of the intention of other parties, possibly via unfair means, involved in the trade.

Key market participants like SWIFT and Thomson Reuters have expressed their support for the new code adding that their practices were in line with its provisions. Roger Rutherford, chief operating officer of spot foreign exchange electronic trading platform ParFX noted that the new code will introduce transparency for all parties.

Karim Haji of the consultancy firm KPMG was also in agreement, stating that a global code was an important step towards building trust in the global foreign exchange market which handles daily trading volumes in excess of $5 trillion.

David Mercer, chief executive of LMAX Exchange called the code pragmatic and believes that the code should do more particularly in the areas of pre-trade hedging and last look. He stated that since the working group was planning to continue consulting the market, amendments could be added in the future to address these areas.

The code is also expected to look into regulating algorithmic trading. Under this service providers will need to provide sufficient information disclosure regarding their operation. A Global Foreign Exchange Committee has been set up comprising public and private sector representatives, who will promote and support these principles.


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