Adherence to Global Code of Conduct will reform behaviour

In the three years since process began to develop a single, global code of conduct for the FX market, the Foreign Exchange Working Group (FXWG) and Market Participants Group (MPG), led by Guy Debelle and David Puth, respectively, under the auspices of the Bank for International Settlements (BIS), have made enormous strides forward.

The two committees have consulted with individuals and institutions far and wide – central bankers, sell-side banks, corporates, buy-side firms, trading platforms, technology firms and trade associations – and now stand on the cusp of achieving what some had thought impossible: facilitating the establishment of a single global code of conduct, with standards and principles that can be adopted across jurisdictions globally, and maintain and enhance principles-based approaches to best practice.

As a member of the MPG, the ACI Financial Markets Association (ACIFMA) has both contributed and witnessed the extent to which market participants and policymakers have engaged, discussed, debated and worked together in the best interest of the wider market.

This is an industry that transacts more than $5 trillion of currencies across borders every single day. Its ability to operate smoothly is crucial to the international economy.

There was, of course, a broad range of views on how best to address a series of topics, such as governance, information sharing, last look and pre-hedging. An array of views is expected in any large consultation, but consensus has been achieved with the best interests of the market in mind.

The final Code will, in my view, outline principles and guidance that are effective, appropriate and strike the right balance. I expect it to act as an essential reference for market participants when conducting business in the wholesale FX markets, and when developing and reviewing internal procedures.

Hardwiring adherence – the third objective

This brings us to the final objective, set out at the beginning of the process: develop proposals to promote and incentivise adherence to the Code.

For this to happen, it is essential that individuals do the following: commit to adhering to the Code; receive the appropriate training and education so they are clear on what is expected, and understand how to comply; and sign up to a solution where senior managers are able to observe and address any training and educational gaps among their subordinates.

This is where ACIFMA can play a central role. With a track record in delivering training, education, attestation and best practice principles that stretches back more than half a century, we represent some 9,000 individuals in over 60 countries.

A meaningful proportion of the market – more than 9,000 FX professionals around the world – will sign up immediately after the Code is launched

There are several ways in which we intend to achieve this. Firstly, we will make it a prerequisite for individuals to commit to adherence to the FX Global Code as part of their membership. This means a meaningful proportion of the market – more than 9,000 FX professionals around the world – will sign up immediately after the Code is launched and commit to understanding, implementing and abiding by the new principles.

Secondly, as part of ACIFMA’s comprehensive certification process – and previous work undertaken by our FX Committee and our Committee for Professionalism in relation to ethical conduct – we will extend our training and certification to support compliance to the FX Global Code, and certify individuals have demonstrated an appropriate understanding of its principles and guidelines.

Lastly, our E-Learning, Attestation & Certification (Elac) portal will become a central repository for continuous education, training and adherence to the FX Global Code. It will enable market participants to understand the practical applications of the Code’s principles and ensure they are aware of any new updates or additions.

Turning point in ethical behaviour

There is already a strong level of market support in anticipation of the second phase of the launch; several sell- and buy-side institutions, as well as central banks, have adopted the Elac portal as a tool for educating their staff and are putting processes in place to support adherence.

In many cases, take-up has been driven by senior managers, who are seeking to monitor training and education levels among their subordinates, while board-level and C-Suite executives are using the Elac to monitor changes in conduct and behaviour across their organisations.

There is an urgent need to restore ethics in financial markets, and the FX market is aware of its responsibilities to clients and stakeholders. The significance of the enormous effort undertaken over the past three years should not be underestimated; to date, the level of leadership and engagement has been exemplary. I expect the FX Global Code to be a turning point in reforming conduct and behaviour in foreign exchange, and developing a renewed sense of trust in this important sector of any economy.