FXPA Warns of “Prescriptive” FX Global Code Changes

In its feedback to the Global FX Committee’s outreach on proposed changes to the FX Global Code, the Foreign Exchange Professionals Association (FXPA) has warned that the amendments “may be overly prescriptive”.

Earlier this month on 9 October, the GFXC published the proposed amendments, largely focused on the Principles dealing with FX settlement risk, data and disclosures, calling for responses by 25 October, and while the FXPA stresses its commitment to the Code, it also pointedly observes the public consultation was “notably short”.

The FXPA also states in its feedback, “We believe that aligning with the Code’s principles-based approach is crucial for benefiting all market participants,” however it adds, “In our view, the further the Code moves away from a principles-based approach, the less likely market participants will be to adopt and conform to the Code, as it will not offer the necessary flexibility to enable adherence to the Code while meeting various jurisdictional regulatory requirements and fostering responsible innovation and greater efficiencies in the market.”

To ensure the amendments are effective, the FXPA suggests that they be accompanied by enhanced explanations, guidance and, where appropriate, cost-benefit analyses. “It is extremely difficult to adequately assess the proposed amendments absent adequate background and explanation, particularly given the very short timeframe provided for public consultation of the amendments,” the feedback states. “The FXPA encourages the GFXC to enhance the focus of the Code revision process by ensuring that market participants, including trading platforms and infrastructure providers, are represented throughout the amendment proposal and consideration process.

“The FXPA also stresses the importance of end-user and buy-side engagement throughout the GFXC revision process to both engage in constructive promotion of the Code to encourage additional buyside commitment to the Code and to ensure that any amendments to the Code that are adopted provide meaningful benefits to market participants,” it continues. “This is particularly important where the GFXC proposes to amend the obligations of liquidity providers and trading platforms for purported benefits to end-users and buy-side market participants.”