GFXC Completes Review of FX Global Code

The Global Foreign Exchange Committee (GFXC) says it has completed the latest three-year review of the FX Global Code, and is updating principals of good practice in several key areas.

The committee is also publishing templates to improve disclosures and TCA reports, as well as a guidance paper on pre-hedging – a second guidance paper, on last look, is due to be published in August.

The standardised disclosure cover sheets for liquidity providers and e-FX platforms will also be made available in August, to help address the challenges market participants can face in accessing and evaluating the information that is disclosed to them.

To encourage providers of algorithmic trading services to share their disclosure information in a standardised format and to assist clients in comparing and understanding the services being offered, the Algo Due Diligence Template is being published by the GFXC. This will work with the Transaction Cost Analysis Data Template that has been developed to assist users of algorithmic trading services in evaluating the quality of their trade execution.

“The updates proposed by our global working groups received strong support from market participants,” says Guy Debelle, chair of the GFXC. “The changes to the Code will ensure that the Code continues to promote the integrity of the market. Many of the changes are designed to bring about greater transparency in an increasingly complex market. These changes are supported by the templates for disclosure and data provision that we have developed for market participants, to provide them a standardised reference point.

“The updates also ensure that the Code and its principles of good practice remain in step with market developments,” he adds.

Almost 1,100 entities globally have signalled their adherence to the Code’s principles by signing a Statement of Commitment, the GFXC says. With the publication of the updated Code, it is encouraging market participants to consider renewing their Statements of Commitment, having regard to the nature and relevance of the updates to their FX market activities.

“The GFXC acknowledges that the changes to the Code will affect certain parts of the market more than others,” says Richard de Roos, co-vice chair of the GFXC. “For those most affected by the changes, we would anticipate a period of up to 12 months for practices to be brought into alignment with the updated principles.”

The guidance paper on pre-hedging seeks to provide further clarity on the appropriate use of this trading practice. The paper discusses the circumstances in which pre-hedging could be used in the FX market and the controls and disclosures that could help align this activity with the Code.

“These guidance papers have benefited from wide-ranging input from market participants, including through a public request for feedback,” says Neill Penney, co-vice chair of the GFXC. “The papers are meant to be read alongside the Code. They will assist market participants from both the buy- and sell-side in applying the principles of the Code to these types of activities.”