The New Code of Conduct to Clean up Foreign Exchange Market's Dirty Reputation is Released

The Bank for International Settlements (BIS) has issued a long-awaited FX Global Code, which is a set of global principles of good practice in the foreign exchange market.

The code a reaction to a number of foreign exchange fixing scandals that have tarnished the integrity of the foreign exchange market place over recent years.

The code has been developed by a partnership of central banks and market participants from 16 jurisdictions to provide a common set of guidelines to promote the integrity and effective functioning of the wholesale foreign exchange market.

It is expected to be adopted across the entire FX market, including the sell-side, buy-side, non-bank participants and platforms.

In addition, the BIS has provided a draft Statement of Commitment for firms to publicly demonstrate their adherence to the Code as it is believed that firms are more likely to adhere to the Code if their peers are doing so too.

“SWIFT welcomes and strongly supports the launch of the FX Global Code as we believe it will strengthen the integrity and effectiveness of the wholesale foreign exchange market. SWIFT has been a core part of the FX market for many years now and the services we provide are fully aligned with the intentions of the FX Global Code. We are very pleased to help support compliance with the Code,” says Stephen Lindsay, Head of Standards at SWIFT, the global payments organisation.

The Code provides a way for foreign exchange professionals to actively demonstrate that they adhere to the highest ethical standards.

"It’s only the beginning of an ongoing process as the industry must continue to strive to rebuild trust.  We will evaluate the Code’s implications for our clients and our electronic trading platforms, as we move toward enhancing performance for all participants in the FX market,” says David Newns, global head of Currenex and SwapEx, as well as EMEA head of GlobalLink at State Street Global Markets.

The move by the BIS to set out new standards is a reaction to recent scandals in the foreign exchange industry which has dented 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 in helping improve market functioning," says the Reserve Bank of Australia Deputy Governor Guy Debelle who chaired the Foreign Exchange Working Group who developed the new guidelines.

The Code contains 55 principles covering areas including ethics, transparency, governance and information sharing. It also tackles complex topics such as electronic trading, algorithmic trading and prime brokerage.