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New FX Global Code to Impact Businesses in Import-Export Trade

By Karen Lynch

A new code of practice for banks and other foreign exchange traders, called the FX Global Code, aims to promote the integrity, transparency, and effective functioning of the FX market.1 Experts say the code may provide international businesses with a clearer understanding of how their currency exchange transactions are handled, as well as greater confidence in hedging strategies and lower foreign exchange-related costs.2

What is the FX Global Code?


The FX Global Code, published in May 2017, was developed following incidences of misconduct in the foreign exchange market, which led to billions of dollars in fines by regulatory agencies.3 It provides a common set of good practice guidelines across the diverse range of participants4 in the $5.1 trillion-per-day foreign exchange market,5 including central banks, commercial banks, hedge funds, corporate treasury departments, brokers, money services businesses, e-trading platforms, and others.6


One goal of the code is to give businesses greater confidence in the global FX market, according to Guy Debelle, Deputy Governor of the Reserve Bank of Australia. "If I'm a corporate wanting to hedge my FX exposure, I want to have the confidence that it's going to be done appropriately. Otherwise I stop hedging, and that doesn't help my business."7


The code lays out 55 principles for market participants, defining guidelines in areas including ethics, transparency, governance, risk management, and information sharing and confidentiality. Development of the code was led by the Bank for International Settlements, an umbrella organization of 60 central banks from across the world, with input from committees representing the sell side, buy side and platform operators in the foreign exchange market.


"The purpose of the Global Code is to promote a robust, fair, liquid, open, and appropriately transparent market in which a diverse set of market participants, supported by resilient infrastructure, are able to confidently and effectively transact at competitive prices that reflect available market information and in a manner that conforms to acceptable standards of behavior," said the Global Foreign Exchange Committee, which is tasked with shepherding its implementation.8


The code provides high-level guidance rather than detailed rules; for example, it says that companies should strive for the highest ethical standards, which includes identifying and eliminating or managing potential conflicts of interest. Several principles could benefit companies relying on foreign exchange for import-export trade. Among them is Principle 21: "Market participants should communicate in a manner that is clear, accurate, professional, and not misleading." Another is Principle 32: "Market participants should have appropriate processes in place to identify and manage operational risks that may arise from human error, inadequate or failed systems or processes, or external events."9


While the FX Global Code is voluntary, adherence may become mandatory for traders doing business with some organizations, such as the European Central Bank10,11 and members of the ACI Financial Markets Association, a trade association for the professional financial markets community.12,13 The BIS process has also produced a blueprint to drive and monitor implementation, which is expected by May 2018.14


Corporate Benefits in Foreign Exchange


In today's foreign exchange market, because there is no centralized exchange, it can be difficult for businesses to get information about the pricing and execution of their trades, as reported in the Wall Street Journal.15


Experts say the code may improve transparency, cost, and other aspects of foreign exchange transactions for businesses. According to one risk management advisor: "More transparency and more information will lead to corporates getting better foreign exchange pricing."16 The code provides clear guidelines for communications about the execution of trades, as reported in the Economist. "Managers of FX traders will now be enjoined to … ensure that clear guidance has been given on approved channels of communication," the magazine wrote. "Greater disclosure is also demanded on how orders are processed, so that clients will never lose oversight and control of their trades."17 Other observers have noted benefits such as limits on the use of confidential information, as well as mitigation against potential market failures and conflicts of interest.18


The BIS continues to work on further clarifying guidelines for "last look," a practice that allows market makers to pull out of trades after quoting a price.19 The question posed by one management consultant is this: "How do you identify and effectively mitigate conduct risk in electronic trading with features like last look, which allows dealers to reject client orders at their sole discretion?"20


Corporate Responsibilities


Some corporate treasuries face new responsibilities as well as potential benefits, as one of the categories of market participants specified in the FX Global Code, according to the Association of Corporate Treasurers. Indeed, some non-financial corporations have already committed to adhere to the code.21


However, the association points out that there is a concept of proportionality embedded in the code: "the steps that a very active market participant engaging in complex transactions takes to align its practices with the code may differ from those taken by less active participants."22 One expectation of the code is that businesses "should be aware of the risks associated with the transactions they request and undertake, and should regularly evaluate the execution they receive," according to an FX platform operator.23



The FX Global Code released in May 2017 potentially offers benefits and brings new responsibilities for international businesses relying on foreign exchange. The extent to which the code helps to promote a robust, liquid, open, and transparent global FX marketplace may become more apparent over the coming year.

Karen Lynch - The Author

The Author

Karen Lynch

Karen Lynch is a journalist who has covered global business, technology and policy in New York, Paris and Washington, DC, for more than 30 years. Karen also is a principal at Content Marketing Partners.


1. “FX Global Code,” Global Foreign Exchange Committee;
2. “New Foreign Exchange Code Could Mean Lower Costs,” Wall Street Journal;
3. BIS Releases New Set of Standards for Currency Trading,” Wall Street Journal;
4. “Global Code of Conduct Sets Out Good Foreign Exchange Market Practice,” Global Foreign Exchange Committee;
5. “Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Markets in 2016,” Bank for International Settlements;
6. “FX Global Code,” Global Foreign Exchange Committee;
7. “Banks Told to Sign Up to Forex Deal or Be Shunned,” The Australian;
8. “FX Global Code,” Global Foreign Exchange Committee;
9. “FX Global Code,” Global Foreign Exchange Committee;
10. “ESCB Central Banks Welcome the Publication of Foreign Exchange Global Code of Conduct,” European Central Bank;
11. “ECB Leaves No One Behind, FX Global Code is Now Mandatory,” Finance Magnates;
12. “Concluding Statement of the ACI FMA Leadership Meetings,” ACI Financial Markets Association;
13. “ACI FMA Mandates its Members to Commit to FX Global Code,” FX-MM;
14. Report on Adherence to the FX Global Code, BIS Foreign Exchange Working Group;
15. “BIS Releases New Set of Standards for Currency Trading,” Wall Street Journal;
16. “New Foreign Exchange Code Could Mean Lower Costs,” Wall Street Journal;
17. “A New Code Aims to Clean Up the Foreign-exchange Market,” Economist;
18. “Implementation of the FX Global Code,” Monetary Authority of Singapore;
19. “GFXC Request for Feedback on Last Look Practices in the Foreign Exchange Market,” Global Foreign Exchange Committee;
20. “Much-anticipated FX Global Code of Conduct Published,” FX-MM;
21. “Market Participants Group Statement of Intent,” Global Foreign Exchange Committee;
22. “Briefing Note on FX Global Code: Guidance for Corporates,” Association of Corporate Treasurers;
23. “FX Global Code: 2016 Perspective Paper,” Thomson Reuters;

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