The outline of the second iteration of the GFXC’s global FX code is expected in October in the form of a public consultation, confirmed panellists, six years on from its inception.
Torsti Silvonen, Philippe Lintern
Philippe Lintern, head of the foreign exchange division at Bank of England, asserted that checks are essential to ensure continued efficacy and to “keep the code alive”.
He confirmed that though the consensus is that it’s working well, some updates and revisions are being made based off the back of feedback from industry working groups.
“If the code is something that someone in your compliance department, a predecessor, signed off 22 years ago that’s not very useful. It’s important to kind of keep people coming back to it.”
Specifically, the panellists shared that the updates are set to be centred on three key themes: the enhancement of adherence on the buy-side, FX market data (in particular what to do with it for delegated execution), and FX settlement risk – the discussion revealed the fact that recent market data suggests that somewhere between 10 to 15% of the daily turnover in FX is set up growth without any risk mitigation.
“[…] Really have that idea of waterfall of risk and trying your best to mitigate risk in any way possible because the risk is still material at the market level,” said Lintern.
Torsti Silvonen, deputy director general at the European Central Bank, made clear the real opportunity available to market participants to have agenda-setting power through this review, as well as empirically benefit from it.
Being part of workshops and local FX committees provides key insight on how counterparties are behaving, and how to minimise market impact – “Whatever your role is in the FX market, you want to conduct your activities in that best possible using best possible practices. So I think there’s something for everyone,” said Lintern.
Elsewhere, Silvonen highlighted the important benefit of the global code being principles based, as opposed to rules based currently, asserting that this approach “it makes you ask the right questions,” as Lintern added an indiscreet warning: “If we as the markets don’t fix it ourselves, at some point our good regulatory friends will […] which will probably be considerably more expensive.”