BIS Wants to Strengthen FX Global Code

BIS markets committee is calling for more asset management companies in the foreign exchange market to adopt the FX Global Code. Only a fraction of the major buy-side participants, such as asset management companies, have adopted the code. The BIS Markets Committee also wants to strengthen the code.

30 January, 2020 | AtoZ Markets – The Global Foreign Exchange Committee (GFXC) launched FX Global Code in 2017. GFXC is a global association of FX committees that includes both central banks and private sector participants. The code outlines a series of good market practices for the global forex market. The market has a turnover of over 6.6 trillion dollars a day.

BIS Calls for Wider Adoption of FX Global Code

More participants in the foreign exchange (forex) market need to adopt the FX Global Code, said the Bank for International Settlements (BIS). However, large buy-side participants, such as asset management companies, have not adopted the code. But, regulators, such as the Financial Conduct Authority (FCA), have recognized the code.

 A growing number of market participants are showing interest in signing up to it. Jacqueline Loh, chair of the BIS markets committee, in a letter to Guy Debelle, chair of the GFXC said:

Only a fraction of the major buy-side participants, such as asset management companies, have adopted the code until now. As their share in global FX trading increases further, they should adopt the code to ensure a fair and effective FX market for all. 

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BIS Urged the GFXC To Strengthen the Code

The code comes up for review this year almost after three years of its launch due to the rapid rise of algorithmic trading. Besides, BIS urged the GFXC to strengthen the code. This could be achieved by improving transparency and disclosure of trading practices on anonymous and algorithmic trading platforms. The Committee’s recommendations will be part of the first review of the code by the GFXC in 2020. Jacqueline Loh said:

The GFXC is actively encouraging buy-side adoption through various initiatives to sign up at the most senior levels of buy-side companies. However, it could explore additional ways to embed the code (for example, mobilize public authorities and market participants). The GFXC could also explore improvements to existing adherence mechanisms, for example, by providing more clarity on the proportionality principle.

BIS Global Economy Meeting (GEM) Chair Mark Carney said:

A lot has been done since the launch of the code. It has become a benchmark for FX related issues and has helped improve standards of behavior in FX markets. GEM Governors are waiting with anxiety about the revision of the GFXC, which will help ensure that the code remains relevant and dynamic.

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