4 July 2018
Last week, the highly anticipated Global Foreign Exchange Committee (GFXC) meeting in Johannesburg, South Africa took place. The new Chair and Co-Vice Chairs were selected, an update on developments since the launch of the FX Global Code was provided and priorities were set for the next year.
All of us at ParFX would like to welcome new Chair, Simon Potter, and Co-Vice Chairs, Adrian Boehler and Akira Hoshino. The experience and knowledge of the new leadership team makes them the ideal team to spearhead the GFXC’s efforts to improve ethics in the FX market over the coming years.
Following the Code’s first anniversary in May, it was the right time to reflect on its progress and discuss what more needs to be done to promote adoption across the industry.
I’m pleased that there are now more than 300 institutions that have committed to the Code’s principles. As ParFX was one of the first to sign up to the FX Global Code, we have seen first-hand that adoption has been somewhat of a steady, trickle-down process. What we are now seeing is the Code gaining momentum and beginning to feed through to asset managers and other end-users which is testament to the GFXC’s work in this area.
The GFXC intends to build on this with the establishment of a dedicated group to deepen engagement with the buy-side. I believe that this is a critical step for the Code’s development and its continued integration in the FX market, and will go a long way to increasing buy-side adoption.
The meeting also highlighted that market participants still have some key concerns relating to disclosures, behaviour in anonymous trading environments, and a lack of trading transparency. In my opinion, it is right that the GFXC reviews current market practices, conducts further work and consults with the industry on these topics.
The lack of post-trade transparency means counterparties are unable to identify each other or confirm their respective policies and practices relating to execution, cover-and-deal and last look, for example.
ParFX has been pushing for increased post-trade transparency since we launched five years ago. In what is a first for a major spot FX platform, the executing broker, prime bank and prime client give up their names post-trade on ParFX. This, combined with a multitude of other differentiators, creates a robust deterrent to any potential disruptors, as latency-led misbehaviour supported by anonymity simply cannot flourish in such an environment.
We therefore support the GFXC’s objective to identify any relevant challenges or risks relating to the provision or receipt of appropriate transparency in the context of anonymous trading activity and consider further work as appropriate.
The meeting is very much a step in the right direction, but the Code still has a way to go, and will almost certainly become a continuously evolving programme. The FX market has always been subject to change and innovation, and the Code will have to adapt to changes yet to come.
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