15 July 2021

The GFXC has completed its review of the FX Global Code, updating its principles of good practice in the foreign exchange market in several key areas. The Committee is also publishing templates for industry participants to use in improving disclosures and assisting with transaction cost analysis.

The GFXC’s updates to the FX Global Code follow an extensive process of consultation with the foreign exchange committees around the world and a public request for feedback in April. Updates have been made to eleven of the Code’s fifty-five principles and strengthen the Code’s guidance on anonymous trading, algorithmic trading and transaction cost analysis, disclosures and settlement risk.

GFXC Chair Guy Debelle commented that: “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, standardised Disclosure Cover Sheets for liquidity providers and for FX E-Trading platforms will be made available by the GFXC in August.

To encourage providers of algorithmic trading services to share their disclosure information in a standardised format and to assist clients in comparing and understanding the services being offered, an Algo Due Diligence Template is being published by the GFXC. A Transaction Cost Analysis Data Template has also been developed to assist users of algorithmic trading services in evaluating the quality of their trade execution.

Almost 1,100 entities globally have signalled their adherence to the Code’s principles by signing a Statement of Commitment. With the publication of the updated Code, the GFXC is encouraging market participants to consider renewing their Statements of Commitment, having regard to the nature and relevance of the updates to their FX market activities.

“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” said GFXC co-Vice Chair Richard de Roos (Standard Bank).

The GFXC is also publishing a guidance paper on Pre-hedging that provides further clarity on the appropriate use of this trading practice. The paper 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 being finalised for publication in August.

“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” said GFXC co-Vice Chair Neill Penney (London Stock Exchange Group).

The GFXC met on 28 June to endorse the outcomes of the Code review. A paper summarising the outcomes of the Code review and highlighting the specific changes to the Code is also being published, along with the responses received by the GFXC to the public request for feedback on its proposals.