GFXC Publishes Proportionality Tool, Names New Chair

The Global Foreign Exchange Committee (GFXC) has launched a proportionality self-assessment tool on its website, aimed at building buy side engagement with the FX Global Code further. At its semi-annual meeting in Mexico City, GFXC chair Andréa Maechler also stepped down six months early from the role, following her appointment as deputy general manager of the Bank for International Settlements in March.

The proportionality tool has been developed to support the process of identifying which of the 55 Code Principles apply to market participants based on their activities in the FX markets. By answering a series of questions, market participants can generate an easy-to read report highlighting the Principles most relevant to them.

Although aimed at all participants, this release is very much aimed at extending buy side adoption of the Code. While many of the largest firms in the asset management space have signed up to the Code, there is a general feeling of disappointment in the industry that more have not done so. Those firms slow to sign up often remark that only sections of the Code are relevant to them and the work involved in ensuring adherence is onerous and of little worth considering the relatively low impact it has on their business – more on that in The Last Look.

To replace Maechler, The GFXC elected Gerardo Israel García López, general director of central bank operations at the Banco de México, as its new chair with immediate effect. He is a member of the BIS Markets Committee, and has worked at the Mexican central bank for over 23 years, during which time he has been closely involved with asset allocation, investment of the nation’s reserves, and the country’s oil-hedging programme, as well as the adoption of CLS.

Also at the meeting, the Code adherence working group gave an update on its efforts to promote inclusion of the Code in financial education and to partner with rating agencies to recognise the Code within their Environmental, Social and Governance (ESG) assessment criteria. In comments to the meeting, Maechler praised both initiatives as very effective in further embedding the Code into FX markets and encouraged work in these areas to continue.

Furthermore, the GFXC announced that it will conduct a survey in September 2023 to measure the effectiveness of the revised version of the Code, released in July 2021 and its associated material. The information collected through the survey will assist the GFXC in determining where to focus the next Code review. On the survey, García López says, “I am honoured to be shaping this central work, which ensures that the Code remains relevant for the rapidly evolving FX markets. I am confident that a broad set of market participants will leverage this opportunity to further develop best practices by taking part in the survey.”

GFXC members were updated on efforts by local FX committees to improve the data collected in relation to FX settlement risk. There was also a discussion of a possible role for the GFXC in coordinating future work on this topic.

Finally, the GFXC was updated on Code outreach activities by local FX committees. Members also discussed the conditions in the FX markets, and the possible implications of shortening the US securities settlement cycle from T+2 to T+1, which comes into effect on 28 May 2024.