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David Woolcock 23-May-2016 09:58:48 3 min read

One Code to bind them all...



On the 26th of May part 1 of the Global Code of Conduct will be published. This will be the high level principles to govern in a single code the unregulated over the counter (OTC) wholesale FX market. Part 2 will be published in exactly one years’ time. This will be the last part though, so not quite as long a saga as the Lord of the Rings!

One of the key differences to this new Code as opposed to previous codes, is that it is explicitly designed to cover all wholesale market participants. As such, the Global Code produced under the auspices of the BIS will cover Banks, Financial Institutions, Corporates, Alternative Liquidity Providers and Platforms (including retail platforms but not including the users of these platforms, retail FX generally is separately governed by competent authorities in each jurisdiction). Meaning that the totality of the wholesale market is pretty much covered by one common code with global reach. When this important work is complete, many market practices that have some questions over them (so called “grey areas”) will be clarified and as such, will build on the work of the Bank of England in the Fair and Effective Markets Review. The subject matter dealt with in the first part is that which is deemed as needing more clarity by market participants. It has been observed to effect the smooth functioning of the FX market. So look out for guidance on ethics, information sharing, execution (including mark-up) and confirmation and settlement. All this comes at a time of great regulatory change for Market Participants who are regulated (just look at the impact of MiFID II by way of example) and is causing some re-thinking of market structure and how firms operate within the new climate.

In part 2 of the code, it is anticipated that more detailed guidance will be given.  Mainly to the thorny issues of governance, risk management and compliance, as well as further aspects of execution including e-trading and platforms (including last look), prime brokerage, and the unique features of FX swap, forward, and option transactions.  

In my next submission I will be exploring what are the practical implications of the Code. And therefore, what remedial action maybe required by market participants to make sure they comply with the letter and spirit of this new and crucial guidance. Subscribe to our blog today and stay tuned into the saga of the “One Code to Bind Us All”.


David Woolcock

David Woolcock is an independent consultant and Director, Business Consulting at Eurobase. In addition, David is Chair of the Committee for Professionalism at ACI – The Financial Markets Association as well as Vice-Chairing the ACI FX Committee. He is also a member of the Market Practitioners Group for the Bank of International Settlement's FXWG that wrote the FX Global Code.