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FX Code & Financial Markets

Friday 20 August 2021

Four years on the code the FX code pf conduct remains fit for purpose. 

This week Assistant Governor Christopher Kent of the Reserve Bank of the Australia (RBA) addressed the updates to the FX code of conduct last month after the being launched four years ago. 

“A consistent theme of the feedback was that the Code remained fit for purpose and changes should only be made as necessary. To this end, the GFXC identified some key areas requiring attention to ensure that the Code continues to provide appropriate guidance.”
He also called on market participants on the buyside and the sell side to the review the code the updated FX Code. 
What has changed?
 While Kent did not go into detail in the changes, he noted that that any changes that did place was connected to transparency in ‘an increasingly complex market.’

He continued that the Global Foreign Exchange Committee (GFXC) thought that it would be better for the market to greater transparency and disclosures and on the algorithm that are being used in the market. 

The Assistant Governor also addressed the issue of the anonymous trading. 

“Electronic platforms used in the FX market can vary in the degree of anonymity offered to their participants. But the more anonymous participants are allowed to be, the harder it is for users to communicate expected standards of behaviour or monitor the actual behaviour of their counterparties.”
Risk & Compliance
 As has been specifically mentioned in code, while there have been changes to the FX Code the core principles around risk and compliance in markets remain the same.

  • The responsibility rests with the business unit which owns the risk it incurs in conducting its activities.
  • In addition, there may be both a risk management function that oversees risk-taking activities and assesses those risks independently from the business line, and an independent compliance function that monitors compliance with Applicable Law and Standards.
  • Finally, there may be a review or audit function that provides independent review of, among other things, internal control systems and the activities of the business unit and the risk management and compliance functions.