FX Global Code of Conduct FAQs

10th June 2024

  1. What exactly is the FX Code, in a nutshell?

The Global FX Code of Conduct is a comprehensive set of principles and guidelines designed to promote a robust, fair, liquid, open, and appropriately transparent foreign exchange (FX) market. Developed through a collaborative effort among central banks and market participants, it aims to enhance integrity and effective functioning of the FX market.

The FX Code establishes best practices for market participants, covering areas such as ethics, governance, execution, information sharing, risk management, and compliance. It emphasises the importance of maintaining high standards of conduct, fostering a culture of professionalism, and ensuring adherence to applicable laws and regulations to sustain market confidence and protect market participants from misconduct.

  1. Treasurers are already drowning in regulation – do we really need voluntary codes as well?

Voluntary codes, such as the FX Code, are not the same as regulations. Rather, they are essential elements of good governance – and therefore also represent the ‘G’ in ESG. These codes, where applicable, can therefore serve as a robust foundation for treasury policy and procedures.

By using voluntary codes in this way, alignment with best practice can be achieved, and ongoing adherence is integrated into regular policy and wider review cycles. This approach ensures that the policy is based on a framework maintained and updated by industry experts, which can be followed and adapted as necessary. Additionally, it provides evidence to stakeholders of a deeper commitment to governance and risk management.

  1. What are the usual sticking points for a corporate to signing up to the Global FX Code?

According to research by Coalition Greenwich, over half of corporates surveyed are unaware of the Code entirely. Other respondents suggested that they either don’t consider themselves active enough in the FX marketplace or do not understand the potential benefits. Some also perceive the FX Code as an additional burden.

As such, there are many misconceptions to dispel.

The key point to emphasise is that most corporates are already largely aligned with the standards of the FX Code through the maintenance of their existing standards. Moreover, the evaluation of which principles of the FX Code are applicable – and how to proportionately apply them to market interactions – is at the discretion of the corporate entity. This can, however, be challenging as there is no definitive right or wrong answer.

The use of the proportionality tool is recommended to help a business understand where the FX Code can apply to them, and how their current processes align with it. Going through this process can highlight areas where some minor adjustments are needed. An external sounding board can provide valuable additional feedback if desired.

Finally, embedding the FX Code within the treasury policy as a foundational element makes it a core aspect of operations rather than a supplemental resource. This approach can mitigate resistance from legal and compliance departments, as it integrates the FX Code into the fundamental policy framework.

  1. How can corporates ensure codes of conduct are implemented? And whose role it is to ensure implementation and monitoring compliance? Is it the treasurer’s duty?

When it comes to ensuring codes of conduct are implemented, incorporating the FX Code into the next policy review is a crucial step. Adding a governance section is an effective way to explain the FX Code, its relevance to the organisation, and how best practice principles are proportionally integrated throughout the policy.

Accountability should fall to the existing delegation structure. For instance, treasury can own the policy, which is then reviewed by the risk committee and approved by the board. This systematic approach ensures that implementation and compliance monitoring are managed efficiently.

In addition, using the proportionality tool annually – as part of the policy review cycle – can help update the policy where necessary. The output from this tool can support the review process, making sure that the code remains relevant and is effectively integrated into the organisation’s governance framework.

  1. Where can I sign up to the FX Code?

After having completed the self-assessment using the proportionality tool, conducted a gap analysis, and obtained management approval, the next step is to sign and submit a Statement of Commitment on the FX-Hub (https://fx-hub.org/companies).

The wording is available on the Global Foreign Exchange Committee website.
Discover more: www.fx-hub.org www.globalfxc.org

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