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Bank of England launches global code of conduct for FX markets

Today the Bank of England launched the new FX Global Code of Conduct

This comprises a common set of guidelines aimed at promoting the integrity and effective functioning of the institutional FX market.  Although they do not impose legal or regulatory obligations upon FX Market Participants, it is likely these will be adopted by most local regulators as the definitive standard for FX markets and firms will be expected to incorporate the Global Code into their own internal FX policies and processes. 

The Code is the product of the Foreign Exchange Working Group, which was established in July 2015. The working group is a committee comprised of FX Market Participants such as banks, buy-side firms, market infrastructures, family offices, trading platforms, algorithmic trading firms, investment advisers, brokers and other non-bank participants as well as central banks from a number of jurisdictions (including the UK).

Following the scandals involving alleged rigging of Forex benchmarks, the FX Global Code represents the culmination of a globally coordinated effort between regulators and international banks to define a new set of standards to which participants and markets will now be expected to adhere.

This effort is unique because it is truly global, with no respect for regulatory borders and highlights the influence that UK financial regulators have on the world stage.  It also shows the UK continuing to set the agenda for financial markets. This new single Global Code will go a long way to improving trust in an ethical, transparent and efficient FX market.

The first part of the Global Code of Conduct was published in May 2016 (phase 1).  This set out global principles of good practice in the foreign exchange market to provide a common set of guidance to the market, including in areas where there is a degree of uncertainty about what sort of practices are acceptable, and what are not.

It covers areas such as ethics, information sharing, aspects of execution and confirmation and settlement.  Phase 2 (published 25 May 2017) covers further aspects of execution including e-trading and platforms, prime brokerage, as well as governance, risk management and compliance.

The Global Code is a single Code for the entire FX industry.  To ensure adherence with the Code, market participants will need to take practical steps such as training their staff and putting in place appropriate policies and procedures. 

In the UK, the Code will be augmented by the UK Money Market Code covering Securities Lending, Repo and Money Markets, as well as complemented by the Precious Metals Code being prepared by the LBMA.  Together these three codes will replace the Non-Investment Products (NIPs) Code which had been drawn up by participants in the UK foreign exchange, money and bullion markets in conjunction with the Bank of England and FCA.

For more information contact Jake McQuitty, Partner, Head of TLT's Investigations & Enforcement Practice.

T: +44 (0)333 0060891

E: jake.mcquitty@tltsolicitors.com

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions



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