By Lisa Dukes
Member of the London Foreign Exchange Joint Standing Committee (FXJSC, chaired by Bank of England).
& UK Private Sector Representative to the Global Foreign Exchange Committee (GFXC)
The most recent Global Foreign Exchange Committee (GFXC) meeting was held in person in Frankfurt at the European Central Bank earlier in the year. Below is a brief summary of the key discussions and developments. More details can be found within the full minutes available.
Please contact me on lisaFX@dukesandking.com if you would like to know more or to send me feedback on this article. It would be helpful to hear what resonates with you regarding FX Global Code engagement and what guidance would help you to manage your stakeholders.
Update on FX Global Code adherence
The GFXC Global Index of Public Registers continued its steady growth, welcoming new market participants including the Central Bank of Costa Rica. It was also recognised that many more institutions see the benefits of following to the FX Global Code without making their adherence public.
The GFXC Motivation for Adherence Working Group, of which I am part, provided an update to the main committee. The aim of the working group is to promote a deeper understanding of the benefits and increase the visibility of the code for all market participations – in particular the buy-side. The need for more visibility of the code was highlighted to encourage engagement.
The success and ongoing development of the Corporate Knowledge Hub was well received and further outreach through both the mainstream and social media and conferences is to be undertaken in the coming months. This will be achieved through partnering with various industry groups as well as promoting the GFXC’s Proportionality Self-Assessment Tool and the Disclosure Cover Sheets, especially among buy-side participants.
The recent Coalition Greenwich survey among 317 corporate respondents was discussed. It revealed that most were unaware of the code, mainly because they weren’t active in the FX markets (41%) or didn’t see any benefit in adopting the code (19%). However, reasons for adopting it included creating a level playing field among corporates and their banks (52%), ensuring high governance standards in line with corporate policy (52%), and improving internal and external FX procedures (44%).
Introduction to the new GFXC website
Members were presented with the new GFXC website with its updated look to improve user navigation and make the code more prominent, thus making it easier to access. It was also announced that the Proportionality Self-Assessment Tool has also been made available in Japanese.
In addition to the Hub, there are also useful resources, including the Proportionality Tool on the GFXC website.
Update on triannual review
A significant part of the meeting was devoted to updates from the working groups reviewing potential changes to the code for the three-yearly review due to conclude at the end of 2024.
The two main areas of focus include reviewing settlement risk and FX data within the existing code wording. Five principles are under review across these areas to enhance market transparency and ensure a level playing field for all market participants.
The glossary is also under review, including clarifying Standard or Standing Settlement Instructions (SSIs). Which term are you in? An A-Z is coming to the FX Hub soon – please do not hesitate to suggest an entry
I look forward to updating you on how this could impact corporate users of the FX market!
ISDA definitions
The International Swaps and Derivatives Association (ISDA) joined the meeting to advise that its FX definitions are being updated, with a final draft expected by November 2025 and implementation by 2027. The new definitions will be available in a digital format with search and hyperlink functionalities to make navigation easier. The review process includes consolidating all FX documentation and integrating Emerging Markets Trading Association (EMTA) template terms for non-deliverable forwards and options.
Technology innovations
The Bank for International Settlements (BIS) joined the meeting to lead a discussion on how AI is evolving, and ways in which it could change the FX market. The debate highlighted AI’s rapid development and uptake and potential benefits in areas such as credit scoring and asset allocation. The risks, such as market concentration and AI producing nonsensical outputs, were also considered.
The history of technology in FX markets was also discussed, noting the shift towards electronic trading, the use of AI, and the growing trend of tokenising assets, which could become more common in the next five years with the help of CBDCs.
Accelerated settlement and its impact on FX markets
In the last updates, we raised the then upcoming change to T+1 for US Securities Settlement which came into effect on 28 May 2024. The committee welcomed a panel to brief attendees on the change, which passed without disruption thanks to the industry being suitably prepared for the transition.
Further reading
For those who enjoy diving deeper into the topic, here are links to extra resources that you may find interesting, including a paper on pre-hedging, which is often an area that is heavily discussed.
