GFXC updates 20% of FX Global Code’s principles and announces templates, guidance

Rick Steves

Eleven of the Code’s fifty-five principles were reviewed. The committee strengthened the Code’s guidance on anonymous trading, algorithmic trading and transaction cost analysis, disclosures and settlement risk.

The Global Foreign Exchange Committee (GFXC) has announced it has updated the FX Global Code, published new templates for disclosures, and a guidance paper on pre-hedging.

Following an extensive review of the FX Global Code, the committee has updated the principles of good practice in FX in several key areas.

The GFXC has updated eleven of the Code’s fifty-five principles and strengthened the Code’s guidance on anonymous trading, algorithmic trading and transaction cost analysis, disclosures and settlement risk.

GFXC Chair Guy Debelle said: “The updates proposed by our global working groups received strong support from market participants. The changes to the Code will ensure that the Code continues to promote the integrity of the market. Many of the changes are designed to bring about greater transparency in an increasingly complex market.

“These changes are supported by the templates for disclosure and data provision that we have developed for market participants, to provide them a standardised reference point. The updates also ensure that the Code and its principles of good practice remain in step with market developments.”

To help address the challenges market participants can face in accessing and evaluating the information that is disclosed to them,

The GFXC will release standardised Disclosure Cover Sheets for liquidity providers and for FX E-Trading platforms in August 2021.

The committee will also publish a Algo Due Diligence Template to encourage providers of algorithmic trading services to share their disclosure information in a standardised format. This will also assist clients in comparing and understanding the services being offered.

Algorithmic trading services will be provided with a Transaction Cost Analysis Data Template in order to help users in evaluating the quality of their trade execution.

The FX Global Code has been adhered by nearly 1,100 entities, who signed a Statement of Commitment to the code’s principles. The update is also meant to encourage market participants to consider renewing their Statements of Commitment.

GFXC co-Vice Chair Richard de Roos (Standard Bank), commented: “The GFXC acknowledges that the changes to the Code will affect certain parts of the market more than others. For those most affected by the changes, we would anticipate a period of up to 12 months for practices to be brought into alignment with the updated principles.

In addition, the committee intends to provide further clarity on the appropriate use of pre-hedging. THe GFXC will be publishing a guidance paper that discusses the circumstances in which pre-hedging could be used in the FX market and the controls and disclosures that could help align this activity with the Code. A guidance paper on Last Look is expected to be released in August.

GFXC co-Vice Chair Neill Penney (London Stock Exchange Group), said: “These guidance papers have benefited from wide-ranging input from market participants, including through a public request for feedback. The papers are meant to be read alongside the Code. They will assist market participants from both the buy- and sell-side in applying the principles of the Code to these types of activities.”

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