Fresh controls on wayward behaviour in the FX market are under construction, with the start of a special committee’s work to draw up a new code of conduct.
Unveiled in May at the Bank for International Standards, the Foreign Exchange Working Group (FXWG) met for the first time in late July to begin the process of drafting the code, which aims to avert further instances of global rate rigging and other types of forex corruption.
In a field where trade has no borders, the working group has been tasked with crafting a code that will apply internationally – while giving appropriate consideration to the circumstances of individual regions and nations.
With that remit in mind, the FXWG has harnessed the expertise of key figures at some of the world’s top central banks.
Reserve Bank of Australia assistant governor Guy Debelle is leading the group, while Simon Potter – executive VP at the Federal Reserve Bank of New York – will oversee the first of two, primary work streams: putting the code into words.
Chris Salmon, executive director for markets at the Bank of England, will focus on the second, main work stream of incentivising stakeholders to adopt the code.
“A single, global common code of conduct is a necessary goal for the FX industry,” said Debelle as his team got down to work. “The code will be principles-based rather than rules-based, and will provide guidance on what is – as well as what is not – appropriate behaviour for practitioners in the FX market.”
Speaking to the Telegraph on 23 July (INSERT LINK http://www.telegraph.co.uk/finance/bank-of-england/11756726/Forex-trader...), Salmon stressed that, while the forex market’s psychology had changed following public fury over the Libor scandal – which culminated in fines of $5.7bn against five global banks – that new outlook would not steady the ship by itself, “because memories are short”.
Salmon added that, even though UK traders have been required to observe the Non-Investment Products (NIPs) Code as a contingency against lapses of professional judgement, its regulatory effects have fallen short.
In the spirit of his role on the working group, he said: “Although it is true to say the NIPs Code could have been better, actually a number of things that went wrong clearly didn’t comply with the code. So the underlying issue wasn’t the code, as much as lack of adherence to the code.”
The group will source stakeholders’ views on the new code’s creation via a Market Participants Group subcommittee, which will take in thoughts from the buy and sell sides of the market, and from FX infrastructure specialists.
Find out more about the working group here : http://www.bis.org/about/factmktc/fxwg.htm