The FX Global Code Of Conduct

A global code of conduct ("the Code") for the foreign exchange ("FX") market was published in May 2017. Defined as 'a set of global principles of good practice in the foreign exchange market,' the Code provides a common set of guidelines to promote the integrity and effective functioning of the FX market, which has a turnover of more than $5 trillion a day. Developed by a partnership between central banks and Market Participants from 16 different jurisdictions which are international FX trading centres around the world, the Code supersedes and updates existing guidance for participants in FX markets, provided in the UK by the Non-investment Products (NIPs) Code.

By establishing a common set of guidelines, the Code's practical objectives are to promote integrity and to ensure the effective functioning of the FX market. To deliver this, it aims to promote an FX market which is robust, fair, liquid, open, and appropriately transparent. The Code further recognises the diversity of the FX market and confirms that the Code will apply to all. No legal or regulatory obligations on Market Participants are imposed by the Code, nor does it substitute for regulation; instead it is designed to serve as a supplement to relevant local laws, rules and regulations by identifying global good practices and processes.

A strong health warning is given in relation to its scope and authority: 'The content of this guidance in no way supplants or modifies Applicable Law. Similarly, this guidance does not represent the judgement nor is it intended to bind the discretion of any regulator, supervisor, or other official sector entities with responsibility over the relevant markets or Market Participants, and it does not provide a legal defence to a violation of Applicable Law.'

The Code will be maintained and updated by a new Global Foreign Exchange Committee (GFXC). This new body will meet regularly, replacing a more informal commitment from eight foreign exchange committees from Australia, Canada, Euro Area, Hong Kong, Japan, Singapore, UK and the US. The expanded, formalised GFXC will also include representatives from existing, or soon to be established, foreign exchange committees or similar structures in Brazil, China, India, South Korea, Mexico, South Africa, Sweden (representing the Scandinavian market), and Switzerland.

Because the Code is entirely voluntary, there is no power vested with any authority or organisation to enforce it. However, several prominent...