In a step forward to make the global forex market more robust and transparent, UK’s central bank, Bank of England (BOE) on Tuesday (Feb 6th) has formally committed to the FX Global Code of Conduct for ensuring fair and good practices are followed in the forex market and avoiding serious misconduct by the market participants. This will start a process that will force every market participants including prime brokers, prime of primes, brokers and liquidity providers adhere and commit to the FX Global Code of Conduct in the region.
BOE along with six other European System of Central banks (ESCB) including Czech Republic, Spain, Austria, Cyprus, Poland, and Romania have signed on the statement of commitment to the FX Global Code of Conduct. The BOE is also officially committing to the UK Money Markets Code and Global Precious Metals Code on Feb 6th. This announcement comes over a month after Global Foreign Exchange Committee (GFXC) has published the updated version.
Today’s signature of the Bank of England is very important development in the industry and will push prime brokers to follow the suit and sign the code documents themselves.
“The new code comes as the central bank works to restore confidence in the wholesale fixed income, currency and commodities markets in the wake of serious misconduct of recent years,” the BoE in a statement said.
Bank of England’s deputy governor, Dave Ramsden said: “We expect regular counterparties to commit to embedding these principles of good practice in their market activities. Fair, transparent and robust markets, underpinned by high standards, benefit all participants.” further added: “The Bank is strongly committed to supporting and promoting adherence to these codes. We are leading by example in publishing our Statements of Commitment today.”
The Fx Global Code of Conduct was launched initially in May 2016 with brief proposals that was published by Bank of International Settlements. But later on, the paper was expanded in detail on the issues of transparency, execution and governance need for the industry. The code was then supported by some retail brokers and prime of prime providers have already started committing to the code last year.
The global code aims to promote fair, open, robust and transparent market where different market participants are actively supported by resilient market infrastructure.
The need to develop and design the FX Global Code of Conduct was to restore the investor confidence and address the worries about Fx market manipulation. In 2014, many financial institutions were fined billions of dollar after they were found guilty of attempting to rig currency benchmarks. The magnitude of the misconduct triggered the need to review of the trading rules.
