GFXC December Meeting Update and Release of 2024 Code Revision

The last Global FX Committee (GFXC) meeting was held virtually in December 2024. Below is a brief summary of the key discussions and developments. More details can be found within the recently released minutes available.

Following the meeting, on 24 January 2025, the GFXC published the update to the FX Global Code (the Code). The December 2024 version of the Code, which will supersede the July 2021 version, updates its principles of good practice in the FX market in two key areas.

Please contact me at lisaFX@dukesandking.com if you would like to know more, or to send feedback on this article. It would be helpful to know what resonates with you regarding FX Global Code engagement and what would help you to manage your stakeholders.

Update on FX Global Code adherence

The meeting heard that publicised Statements of Commitment had reached 1,328, an increase of 37 in 2024. In addition, it was noted that additional Market Participants had adopted the FX Global Code without making their adherence public.

We also reviewed key statistics on the updated GFXC website and the Proportionality Self-Assessment Tool and it was pleasing to see an increase since the July 2024 meeting. As a reminder, the Code is applied proportionally and should be adapted to your specific circumstances and business activities. This makes the Code realistic and achievable for all, regardless of size or level of market engagement. The tool was developed by the GFXC and is there to help every market participant to determine which principles are applicable for their organisation.

Three-year FX Global Code review update

A significant part of the meeting was taken up reviewing the final proposals to amend the Code under the triannual review. We heard from two working groups that presented proposed updates following consultations with the wider market.

The FX Settlement Risk Working Group summarised the final proposed changes to three principles:

Principle 35: to introduce a risk waterfall approach for settlement methods.
Principle 50: to provide guidance on measuring, monitoring, and controlling FX Settlement Risk.
Principle 51: to promote the use of Standard Settlement Instructions (SSIs) and discourage multiple settlement instructions for the same product and currency.

These updates aim to reduce FX settlement risk, encourage standardised settlement instructions, and promote regular reviews of FX settlement practices. Additionally, the Code’s Glossary of Terms now includes definitions for ‘Standard Settlement Instructions’ and ‘Value Date.’

We also had an update on the Global FX Settlement Risk Survey and were advised that the BIS Triennial FX Central Bank Survey would take place in April 2025, employing a new approach to collecting global FX Settlement Risk data.

The FX Data Working Group has examined whether the Code adequately captures data transparency requirements under certain types of delegated execution and reviewed transparency regarding the use of data generated by clients on electronic trading venues.

They presented the final proposed changes to two principles:

Principle 10: to align the pre-trade responsibilities of a principal in delegated execution activities with those of an agent, and to incorporate post-trade obligations to assist clients in evaluating execution quality. Examples for Annex 1 were also proposed for guidance.
Principle 9: minor changes to add clarity around what type of data was in scope, and what was meant by ‘third parties’. Disclosure Cover Sheets were also updated and an example appropriate disclosure of data sharing polices was included in Annex 1.

For those not familiar with Disclosure Cover Sheets and how they are a useful tool for corporates, I include a two-minute briefing at the end of this update.

Publication of the updated FX Global Code

This triannual review process aims to ensure that everyone continues to uphold the highest standards of integrity and transparency in the global FX market.

Following the updates from the working groups, the GFXC approved the proposed updates to the FX Global Code and its Disclosure Cover Sheets. The new version of the Code, which includes links to essential guidance papers was released on 24 January 2025 along with a summary of feedback received during the review process. There are also plans to translate the updated Code into various languages in 2025.

For those who have already signed a Statement of Commitment, it is recommended that to review the amendments and renew the Statements of Commitment within 12 months of the updated Code’s publication.

For those yet to take advantage of the FX Code, keep an eye out for a bite-size introduction to the Code for Corporates, which will soon be released on the FX-Hub and on LinkedIn.

Recent updates and consultations

On the second day of the meeting, we were joined once again by the International Swaps and Derivatives Association (ISDA), which provided a comprehensive overview of its ongoing four-year initiative to update the FX definitions. The key highlights included:

Disruption events/fallbacks: significant updates regarding non-deliverable/cash-settled transactions, with a focus on offshore Chinese Yuan (CNY) disruption events and fallbacks.
Novation provisions: development of novation provisions for the new FX Definitions.
Future plans: in 2025, work will continue on deliverable disruption events/fallbacks and addressing unexpected holidays.
Calculating agent provisions: efforts to refine calculating agent provisions and define general sanctions.
Settlement disruption discussion: plans to introduce a concept of widespread settlement disruption.

We also were updated on the recently published International Organization of Securities Commissions (IOSCO) Consultation Report on Pre-hedging. For those who would like to contribute, the report seeks feedback by 21 February 25, with final recommendations expected later in 2025. The following impacts are considered:

Market integrity and conduct risks: assessing issues related to pre-hedging.
Definition of pre-hedging: establishing a widely applicable definition.
Acceptable conditions and risk management: defining conditions for acceptable pre-hedging practices and providing risk management recommendations.

Update on motivation for Adherence Working Group

I updated the committee on the topics that my fellow working group members and I have been focusing on over the past six months as well as presenting the work plan for 2025, which can be split into three key areas:

Enhancing the visibility of the code – including promoting tools such as the Corporate FX Knowledge Hub and the Proportionality Self-Assessment Tool
Building partnerships with various industry groups
Improving education and training.

We also thanked Stefanie Holtze-Jen from Deutsche Bank-Private Bank, who concluded her role as Co-Chair of the Motivation for Adherence Working Group. I would like to thank her for the brilliant work that she has carried over the past few years, and I am pleased that she is remaining as a committee member.

I was honoured to be nominated by the Foreign Exchange Joint Standing Committee (chaired by the Bank of England) to succeed Stephanie in the leadership team alongside Wilson Wong (Bank of China) who was endorsed by Treasury Markets Association in Hong Kong, from the Bank of China. Wilson and I will accompany Satish Chandra Rath (Reserve Bank of India) in leading the working group. The final governance structure will be announced soon.

If you are interested in supporting the FX Global Code outreach or would like more information, please do not hesitate to contact me.

Updates and developments

To conclude the meeting, we heard regional insights from various local FX committees across the globe. In summary:

Colombia membership: the Central Bank of Colombia presented a compelling case for the country to join the GFXC as an associate member, providing a comprehensive overview of the country’s FX market.
Recent developments in Japan: these include the unwinding of accumulated short positions in yen following the Bank of Japan’s FX interventions and a rate hike at the end of July. The significant impact of the US presidential election on markets due to the anticipated changes in fiscal policy was emphasised. The Trump presidency is likely to bring changes to the international political and economic landscape. Financial markets are likely to experience a period of uncertainty, necessitating a cautious approach. Looking beyond 2025, the feasibility of a rate hike by the Bank of Japan remains a major concern for market participants.
Euro dynamics: the European Central Bank (ECB) analysed the euro’s recent decline against the dollar, highlighting increased implied volatility and a rise in short positioning. The shift from primary venues to FX futures in trading volumes and the challenges posed by global regulatory fragmentation was also discussed.
US Market Resilience: the resilience of US liquidity conditions despite increased market volatility was noted. The importance of upcoming US fiscal and trade policies for the FX market was highlighted. The successful transition to the T+1 settlement cycle was attributed to industry stakeholders’ preparation. Additionally, the North American Volume Survey revealed a record high in FX turnover.
Indonesian rupiah activity: Bank Syariah Indonesia provided insights into the robust activity in FX derivatives markets involving the Indonesian rupiah, influenced by global macro factors and stabilised by effective monetary policy.

Additional reading

For more detail on the Code, please refer to the GFXC Reports, which contain useful explanatory material and offer insight into the practical implementation of the Code principles.

To find out more about the December 2024 changes, please read the outcomes of the 2024 Code Review and responses received by the GFXC to the Request for Feedback.

Two-minute briefing: Disclosure Cover Sheets

The purpose and benefit of Disclosure Cover Sheets in the FX Global Code is to promote transparency and clarity between market participants, including corporates, and their counterparties. Here are the key points:

Facilitate informed decision-making: Disclosure Cover Sheets summarise the key practices, terms, and disclosures of liquidity providers (e.g. banks) and execution venues in a standardised format. This enables corporates to better understand how their counterparties operate in the FX market.
Enhance transparency: they provide consistent, concise, and comparable information, which aligns with the FX Global Code’s principle of ensuring fairness and openness in the market.
Support risk management: by outlining critical information – such as execution methods, order-handling practices, and pricing mechanisms – Disclosure Cover Sheets help corporates assess the risks associated with their FX transactions.
Promote adherence to the Code: Disclosure Cover Sheets are a tangible way for counterparties to demonstrate their commitment to the FX Global Code’s principles, fostering trust in the market.

Having access and utilising Disclosure Cover Sheets can have several benefits for corporates. These may include:

Improved comparability: corporates can more effectively compare practices across various liquidity providers or platforms, enabling them to select counterparties that align with their strategic objectives and risk tolerance.
Enhanced negotiation power: with access to clear and structured information, corporates are better positioned to negotiate pricing and execution terms, ensuring they achieve optimal outcomes.
Operational efficiency: standardised disclosure reduces the time and resources required for corporates to understand counterparty practices, enabling them to concentrate on core treasury operations.
Regulatory and governance alignment: utilising Disclosure Cover Sheets helps corporates fulfil internal governance requirements and demonstrate due diligence in counterparty selection and FX risk management.
Reduced misunderstandings: by setting clear expectations from the outset, Disclosure Cover Sheets minimise the potential for disputes or misaligned expectations during or after FX transactions.
Stronger counterparty relationships: transparency fosters trust, which can enhance relationships between corporates and their FX counterparties, potentially leading to improved service and pricing.