BTL 721 - FX Global Code

 

The Banking Tutor’s Lessons

BTL 721                                                                              06-11-2024

FX Global Code

The FX Global Code is a set of principles of good practice for foreign exchange market participants. It aims to promote the integrity and effective functioning of the wholesale foreign exchange market. The Global Code was developed by the FX Working Group, a collaborative initiative between central banks and private sector market participants under the auspices of the Markets Committee.

In order to foster transparency and adherence to the Global Code, a public register has been established where central banks can post their Statements of Commitment to the Code.

The Code is a set of global principles of good practice in the foreign exchange market. It contains 55 principles that provide a common set of guidelines to promote the integrity and effective functioning of the wholesale foreign exchange market.

It is intended 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 behaviour.

The Global Code does not impose legal or regulatory obligations on Market Participants nor does it substitute for regulation, but rather it is intended to serve as a supplement to any and all local laws, rules, and regulation by identifying global good practices and processes.

The Global Code is maintained by the Global Foreign Exchange Committee (GFXC).

The GFXC was established in May 2017 as a forum bringing together central banks and private sector participants to promote collaboration and communication on FX matters, exchange views on trends and developments in FX markets as well as promote, maintain and update the Global Code.

The Committee assesses regularly whether particular foreign exchange market developments warrant specific revisions to the Global Code and when judged appropriate, undertakes a comprehensive review of the Global Code.

The Global Code is organised around six leading principles:

Ethics: Market Participants are expected to behave in an ethical and professional manner to promote the fairness and integrity of the FX Market.

Governance: Market Participants are expected to have a sound and effective governance framework to provide for clear responsibility for and comprehensive oversight of their FX Market activity and to promote responsible engagement in the FX Market.

Execution: Market Participants are expected to exercise care when negotiating and executing transactions in order to promote a robust, fair, open, liquid, and appropriately transparent FX Market.

Information Sharing: Market Participants are expected to be clear and accurate in their communications and to protect Confidential Information to promote effective communication that supports a robust, fair, open, liquid, and appropriately transparent FX Market.

Risk Management and Compliance: Market Participants are expected to promote and maintain a robust control and compliance environment to effectively identify, manage, and report on the risks associated with their engagement in the FX Market.

Confirmation and Settlement Processes: Market Participants are expected to put in place robust, efficient, transparent, and risk-mitigating post-trade processes to promote the predictable, smooth, and timely settlement of transactions in the FX Market.

Sekhar Pariti

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