Federal Reserve Bank of New York ("NY Fed") Executive Vice President Simon Potter urged all foreign exchange market participants to adopt the FX Global Code (the "Code"), a set of best-practice principles for operating within foreign exchange markets (see previous coverage). Mr. Potter remarked that while his views were not necessarily those of the NY Fed, his "remarks on the expectations for FX counterparties reflect the policies of the [NY Fed]."
At the 2017 FX Week Conference in New York City, Mr. Potter outlined the Code's focus on six key areas: Ethics, Governance, Execution, Information Sharing, Risk Management and Compliance, and Confirmation and Settlement.
Mr. Potter stated that while the Code is not a binding set of rules, there is an expectation that regulatory authorities and industry participants will promote widespread adoption, not just by FX dealers, but also by "regional banks, asset managers, and corporations, to hedge funds, high frequency trading firms and others." An institution can choose to pledge adherence to the Code's principles through a voluntary Statement of Commitment.
Mr. Potter also emphasized treatment of the so-called "last look" practices and its application to electronic trading platforms. He reported that principle 17 of the Code "likely consumed the most time and energy of any of the principles of the Code," and noted that discussions evidenced that different participants took different views as to what constitutes "last look." Given the range of views, Mr. Potter said that the relevant principle highlights broadly that last look should not be used for information gathering "without an intention to accept the trade request." Mr. Potter also announced a further consultation on last look and asked market participants to submit further comments to the Global Foreign Exchange Committee as to whether "last look" was appropriately described in the Code and whether the provisions on trading in the "last look" window are appropriate.
A group of central bank representatives and private sector market participants released the "FX Global Code" which outlines conduct standards and principles for foreign exchange market participants.
Cadwalader attorneys examined the first phase of the new "Global Code of Conduct for the Foreign Exchange Market" published by the Foreign Exchange Working Group of the Bank of International Settlements.
Available only to Cabinet Premium subscribers.
Combining regulatory and enforcement news, analysis, and practical work tools on an easy-to-use digital platform.