The Bank of International Settlements’ Foreign Exchange Working Group reached the midpoint in developing its Global Code of Conduct for Foreign Exchange with the publishing of its first part of the code on May 26.

The need for such a code is due to the growing portion of agency transactions in a historically principal-based market, according to Phil Weisberg, global head of FRC Trading at Thomson Reuters.

“We’ve seen confusion among clients where they weren’t really aware how the market functioned and whether they were acting with someone who is an agent or a principal,” he said.

The first portion of the code addresses the issues of ethics; information sharing and communications; and confirmation and settlement issues with 17 enumerated principles that range from striving for the highest professional standards to performing timely account-econciliation processes.

Omitted from the 30-page document are the final principles regarding governance, execution, risk management and compliance that the FXWG will include in second portion of the code, which it plans to publish in May 2017.

“One factor influencing our choice of which topics to cover in the first phase was our assessment of what issues the market was looking for clarity on sooner rather than later,” said Guy Develle, assistant governor, financial markets, at the Reserve Bank of Austria and co-chair of the FXWG in a prepared statement. “We have attempted to provided greater clarity on issues such as information sharing and order handling in the document released today.”

“Keep in mind, to get a process together that mixes large numbers of the public and private sectors and get them to agree on a single work product is a very difficult task,” said Weisberg. “The group now has been operation with them and establish processes for making this happen. With that in place, it will enable the mot tackle a little bit more detailed and complex subjects.”

The code, when completed, will supersede every other code and best practices currently in place, according to its authors. However, the code does not impose any legal or regulatory obligations on market participants or replace current regulation and simply will act as a supplement to those local regulations.

The code’s authors intend the code of conduct will cover all those who are active in the FX markets regularly as part of their business; operate a facility, system, platform, or organization in which participants can execute described transactions; provide FX benchmark execution services; or are not considered a retail market participants in the relevant jurisdiction.

“This is not a code of conduct for just the sell side,” said Duevelle. “It is there for the sell side, the buy side, non-bank participants and the platforms; its breadth is both across the globe and across the whole structure of the industry.”

The code does not consider those who run pricing-display platforms; retail remittance or money changing businesses; a private-banking customer who trades as an individual or via personal investment vehicles; or a member of the general public as a market participant.

Featured image via COSPV/Dollar Photo Club

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