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Three years on from the FX Global Code of conduct

Vincenzo Dimase
Vincenzo Dimase
Sales Readiness Director – Trading

The Global Foreign Exchange Committee recently completed its three-year review of the FX Global Code (FXGC). How can Refinitiv support buy- and sell-side firms as they adhere to the updated code?

  1. The FX Global Code is maintained by the Global Foreign Exchange Committee, comprised of central banks and private sector employees. Established in 2017, it aims to promote a global FX market which is robust, fair, liquid and transparent.
  2. As the FX market continues to evolve, it’s important that the FXGC keeps pace with new processes and technologies while remaining practical and directly relevant to the day-to-day practices of the FX market.
  3. To this end, the Global Foreign Exchange Committee, in consultation with the FX industry, has now completed a three-year review of the 55 principles of the FXGC.

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The FX Global Code does not impose regulatory obligations on FX market participants. Rather, it was designed to supplement local laws, rules, and regulation by identifying global good practices and processes. So far, almost 1,100 market participants have signed a statement of commitment to the FXGC.

What’s new in the FX Global Code?

Three years since the launch of the FXGC, revisions have been made that represent more than just a rewording of the original document. The revised FXGC offers more concrete guidance to market participants than previously, in the form of examples and templates, covering topics such as pre-hedging and due diligence.

More clearly defined principles are generally viewed by the industry as a positive enhancement to the FXGC. Although flexibility in terms of implementation is important, firms should not be able to interpret and apply the code according to their own interests.

Refinitiv Deal Tracker: a suite of tools for monitoring and processing every FX trade on all major foreign exchange platforms around the world, from the front to the back office

Key themes of the FX Global Code

As the FX market has evolved, a particular focus of the revised FXGC is anonymous trading, with greater disclosure of information encouraged by those operating anonymous platforms.

Another key area is managing operational risk, with an emphasis on the reduction of manual processes and the adoption of payment versus payment (PvP) settlement processes wherever possible.

Promoting increased market transparency, the Global Foreign Exchange Committee has also expanded its guidance on the information that providers of algo trading and aggregation services should disclose, as well as suggesting that transaction cost analysis (TCA) would benefit from greater standardisation of data reporting.

The new Transaction Cost Analysis Data Template will particularly assist firms with less sophisticated trading operations and/or limited resources.

Record-keeping, especially with regard to the reasons for trade rejections, is also emphasised in the revised FXGC.

How firms deal with counterparties has always been a central theme of the FXGC, and importantly so is the ability to demonstrate that they have signed a Statement of Commitment to the FXGC – whether firms are sell-side, buy-side, brokers or trading venues.

How can Refinitiv help?

Refinitiv’s post-trade suite of products are a cost-effective way to improve and enhance post-trade operational efficiency, reducing manual intervention and facilitating adherence with the FXGC.

Refinitiv Deal Tracker is a fully-hosted suite of tools for monitoring and processing trades on all major FX platforms globally, from front to back office.

Refinitiv Deal Tracker includes trade notifications from Refinitiv Conversational Dealing, Refinitiv FX Matching, other trading venues and bank portals, capturing data across FX liquidity venues.

Refinitiv Trade Notification (RTN) allows clients to access counterparties around the world with a single connection, dramatically improving transparency and allowing genuine straight-through processing (STP).

RTN supports all Refinitiv’s trading venues including Refinitiv FXall, Dealing and Matching. It also connects to a number of single-dealer, multi-dealer and voice broker platforms.

Other services include Refinitiv Compliance Archive, a portal to analyse message and trade activity, and Refinitiv Trade performance Analytics in Refinitiv FXall, which allows users to assess the quality of their historical execution, conduct like-for-like comparisons of liquidity providers and make better-informed trade planning decisions.

Statements of Commitment

Of the 1,100 firms that have so far signed a Statement of Commitment to the FXGC, the vast majority are sell-side institutions.

Buy-side take-up has been slow, with firms often seeing adherence to the FXGC as a complex and resource-consuming process. However, adaptability is an important element of the FXGC. For it to be adopted by the majority of the FX market, it is important to state that principles can, and should, be adjusted to the needs of smaller firms.

Following the three-year review firms are now being encouraged to re-commit to the revised version of the FXGC.

This is expected to take time, with firms keen to review the revisions and their implications for them and for the FX industry as a whole. This thorough process is welcomed since re-commitment should be an informed decision for market participants rather than simply a box-ticking exercise.

Refinitiv Deal Tracker: a suite of tools for monitoring and processing every FX trade on all major foreign exchange platforms around the world, from the front to the back office