FMSB Publishes Draft Good Practice on Trading Platform Disclosures

With the Global Foreign Exchange Committee updating its Global Index to accommodate links to FX market participant Disclosure Cover Sheets, the FICC Markets Standards Board (FMSB) has published a draft Statement of Good Practice for Trading Platform Disclosures. The board is inviting comments and feedback from the industry before 25 February 2022.

FMSB statements of good practice do not form part of the organisation’s Standards and they are not subject to FMSB’s adherence framework. Rather, they reflect FMSB’s view of what constitutes good or best practice in the areas covered by the statements in question.

Observing that electronic trading in FICC markets has increased “significantly” over the past 10 years, FMSB says disclosures play a key role in allowing market participants to understand trading practices and policies across different platform types and have access to sufficient information to understand how their orders or trade requests interact with other platform users and/or liquidity providers.

The latest Statement aims to promote consistency of key information disclosures as to how platforms operate irrespective of their regulatory classification and builds on certain existing regulatory requirements and policy initiatives impacting platform operators and users, including relevant aspects of MiFID II and the FX Global Code.

It also focusses on platforms where the majority of electronic trading in FICC instruments occurs and where increased transparency and harmonisation of disclosures is likely to be most beneficial to users. “Trading platform operators are therefore expected to consider applying these Good Practice Statements in a way that is appropriate and proportionate taking into account the size and complexity of their offerings,” FMSB says.

There are six best practice statements in the draft document, the first stresses that firms operating a trading platform should make available to all participants clear information relating to the operation of the venue. The information should allow participants to determine how their interests, orders or requests to trade will interact with other trading interests, when they can deem a transaction to be binding and the circumstances in which their interests, orders or requests to trade can be rejected or cancelled.

The second statement says platforms should make clear how they handle and disseminate trading data, while the third deals with trade breaks and erroneous trades. The fourth looks at the obligations upon market participants connecting to the platform, while the fifth states that platforms should disclose the types of circumstances in which a platform may temporarily cease trading. The last statement highlights that platforms should not incentivise market participants to trade in a manner that could be seen as market abuse or could create disorderly trading conditions.

The Statement will make familiar reading to those accustomed to the FX Global Code, however FMSB does have to deal with the added complexity of those fixed income markets subject to regulation such as MiFID II. The full document can be accessed here.