What is the FX Global Code?

The FX Global Code of Conduct is a set of principles of good practice in the foreign exchange market developed by a partnership between central banks and market participants.  

The BIS Foreign Exchange Working Group (GFXC) published the FX Global Code of Conduct on 25 May 2017 with the aim of providing a common set of guidelines to promote the integrity and effective functioning of the wholesale FX market.

It published an updated version of the code in 2021 after a public request for feedback and extensive review process with foreign exchange committees around the world.

It’s vital that buy-side firms and corporates are aware of the FX Global Code as it exists for their protection. The code enables them to scrutinise liquidity providers and partners’ processes against best practice, ensuring they achieve best execution and get the transparency they deserve.

Principles of the FX Global Code

The FX Global Code is organised around six leading principles:

1- Ethics: Market participants are expected to behave in an ethical and professional manner.

2- Governance: Market participants are expected to have a sound and effective governance framework to provide  comprehensive oversight and define clear responsibilities for their FX activity. .

3- Execution: Market participants are expected to exercise care when negotiating and executing transactions.

4- Information Sharing: Market participants are expected to be clear and accurate in their communications and to protect confidential information to promote effective communication.

5- Risk Management and Compliance: Market participants are expected to promote and maintain a robust control and compliance environment to effectively identify, manage, and report on the risks associated with their engagement in the FX market.

6- Confirmation and Settlement Processes: Market participants are expected to put in place robust, efficient, transparent, and risk-mitigating post-trade processes.

Who does the code apply to?

A diverse range of firms engage in the FX market in a multitude of ways and across a range of FX products. The FX Global Code is written with this diversity in mind and applies to all participants that engage in the FX market.

This includes an organisation (and includes personnel that carries out the below on behalf of their organisation) that:

• Is active in the FX market as a regular part of its business and is engaged in the activity of trading FX instruments either directly or indirectly through other market participants
• Operates a facility, system, platform or organisation through which participants have the ability to execute trades
• Provides FX benchmark execution services
• Is not considered a retail market participant in the relevant jurisdictions

How many market participants have signed up to the code?

One of the most important features of the FX Global Code is that is does not impose any legal or regulatory obligations on market participants. Instead, it’s a voluntary code of conduct designed to set out best practice and processes.

So, when it was first introduced, the big question was whether market participants would sign up and adhere to a voluntary code.

The BIS and many central banks took on the responsibility of driving adoption among key market participants. Some even required counterparties to sign the code and threatened to cut ties with those that didn’t comply.

Combined with a general feeling that the industry needed to do better by standardising best practice and promoting transparency, this led to widespread adoption and there are now over 1,100 signatories on the global register.

If you’re interested in learning more about MillTechFX and our commitment to best practice, get in touch today.