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By Kristian Karppi, MD, K&KGC


The Global Foreign Exchange Committee’s(1) (”GFXC”) newly created buy-side outreach working group is working to facilitate buy-side adoption of the FX Global Code (Global Code). The working group was founded based on a decision by the Global Foreign Exchange Committee at its meeting on 27th June 2018. Its creation was motivated with the relatively limited adoption by buy-side firms with just short of 60 firms to date. The working group’s objective is to provide impetus to the buy-side community in signing up and committing to the Global Code by enabling them to better understand how they would benefit from it and how they could adhere to it.
While the foreign exchange market is concentrated, it is also dispersed geographically and certainly relevant to a wide span of financial market participants. Thus, for the Global Code to gain recognition and legitimacy it needs adoption of the entire FX market including buy-side firms and the working group was created with this diversity in mind. The working group is led by the European Central Bank (ECB) who is a member of the GFXC via its own Foreign Exchange Contact Group(2). The working group has neither any supervisory nor oversight capacities. Instead it is a group where central banks, asset management firms, associations and corporates located globally in USA, Asia Pacific, Europe and Australia together engage with the industry to facilitate buy-side adoption of the Global Code. 

Dialogue will be key to broadening adoption, “We have to listen to firms reluctant to sign up to the Global Code and understand their reasons,” Roswitha Hutter, Secretary of the Foreign Exchange Contact Group at the ECB, says. “The Working Groups outreach effort just started, but a big part of that will be identifying the challenges that may be holding up broader adoption. Also, we have to explain to market participants the benefits of adhering to the Global Code.”

Any buy-side traders who are interested in more information, can meet the buy-side outreach working group members at the 7th annual Alpha Trader Forum Global Summit FX Day on the 7th February 2019 in London.

Complementing the “buy-side outreach working group”, the GFXC appointed a number of prominent buy-side institution representatives as buy-side liaisons. Those serve as lead representatives to the GFXC and collaborate with the “buy-side outreach working group” by in particular supporting its initiatives. The work of the liaisons group is spearheaded by the buy side itself with initially seven firms providing a voice from the buy side to the foreign exchange industry.

  • Stuart Simmons (QIC)

  • Ankur Pruthi (Norges Bank Investment Management)

  • Robbie Boukhoufane (Schroders)

  • Natalia Chefer (DE Shaw)

  • Takayuki Ohkuma (Nomura Asset Management)

  • Michael O'Brien (Eaton Vance)

  • Claas Kohl (Airbus)



Claas Kohl, Head of Treasury Reporting and Middle Office at Airbus: “The existence of a well-functioning FX Market is very much in the interest of all market participants. Therefore all market participants, including corporates like Airbus, have a collective responsibility towards enhancing and upholding conduct standards across the FX industry. Airbus is therefore committed to the FX Global Code and had already previously been acting in accordance with its leading principles and will continue to do so.”



Robbie Boukhoufane, Portfolio Manager at Schroders: “Adhering to a set of global principles that promote a robust, fair, liquid, open and transparent market place is consistent with how we run our FX activities.  In addition, the operational and oversight principles are in line with our internal procedures and governance structures.  At the heart of the code is the requirement to act with integrity.  This is one of the firm’s core values, ensuring that we strive to do the right thing for our clients.  Therefore adopting the FX global code was a natural step for Schroders.” 




The benefits of the Global Code

An important amount of the outreach effort will involve ensuring buy side firms appreciate the numerous benefits of adopting the Global Code

The direct benefits for the buy side by adopting the Global Code are:

  • Marketing publicly with clients, stakeholders and shareholders that the firm adheres with high ethical and conduct standards. This is the ultimate goal with the Global Code – that good conduct becomes embedded and integrated in the largely unregulated FX market. This leads to fair play and is in the interest of buy-side firms’ bottom line and also serves the interests of the clients whose assets firms are managing. The standardised Statement of Commitment, annexed to the Code, which provides a simple and transparent instrument for firms to publicly demonstrate their commitment to the Global Code.

  • Placing your buy-side firm in a legitimate position to set proper expectations on conduct and quality of service in FX trading activities with your counterparties.

Claas Kohl: “Adherence to the Global Code conveys to other market participants a strong message of commitment and positive affirmation to the good practices set out in the FX Global Code. Airbus also sees adherence to the code as a way of demonstrating compliant behaviour to its stakeholders in the context of a wider ethics and compliance framework. Corporates who adhere to the Code can expect this reciprocally from their counterparties in the foreign exchange markets.”

  • Improving the quality of the dialogue with counterparties, which is critical for best execution. The buy side now have a sense of being able to ask intelligible questions about how their orders are handled, the counterparties pricing or mark-up methodology etc. Trading during the Last Look window has for example been a contentious subject for many years and the GFXC decided to strengthen the Code’s language after it reached out to the broader market for input on this narrow topic. Even if not all participants may be entirely happy with the Last Look practices, there is at least now a single language, which all have to subscribe to. 





Robbie Boukhoufane: “Being part of the code from an asset management perspective is an important step towards contributing towards how it evolves and to ensure the code continues to promote good practice across new innovation and technology as these are introduced into the market place”




Market impact 

Today, around 500 firms across all market participant categories have adopted the Global Code. The global central bank community played an important role in this achievement by signing up early to lead by example. Just to mention a few names; the ECB, all the national central banks in Europe, the Federal Reserve Bank of New York, the Monetary Authorities of Singapore and Hong Kong, and central banks in Australia, Canada and Japan signed up to the Global Code. The central bank community in their turn, in the capacity of buy-side market participants, encouraged their bank counterparties and local FX Committee members to also sign up to the Global Code. The general banking industry, in their role as market makers, have been quick in the adoption, as they had a natural commercial incentive to implement the new market standard particularly given the history of some large banks being fined for misconduct.

First findings in a report by NEX Markets(3) reveal positive impact of the Global Code implementation and suggests improvement in transparency and behaviour in the industry. Using internal data, the report highlights how the e-trading platform has witnessed a significant reduction in hold times, reject rates and a tightening of spreads. 

With these improvements in mind, some market participants highlight that it is likely to become increasingly questionable why a counterparty would respond by refusingor ignoring to sign up to the Global Code as it helps to restore trust and improves business relationships.




Claas Kohl: “Due to the built-in proportionality, many principles may not apply directly to a corporate, but working through them will certainly provide a better understanding of

  • the nature of the business relationship with the banks when concluding a foreign exchange transaction, 

  • how the bank is pricing and executing this transaction, as well as 

  • which kind of risks the bank takes itself during the execution.






Tobias Helmersson, Deputy Secretary of the Foreign Exchange Contact Group at the ECB,  confirms that a central theme in the Global Code is proportionality. “In our dialogue with the market the concept of proportionality has raised many questions. One of our aims is to bring some further clarity regarding that concept as the assessment and adoption process for a firm with limited FX activities may be less detailed than for a more complex one.”   




One particular area where the Global Code aims to bring further transparency and to improve business conduct relates to Last Look practices. In December 2017, the language on trading behaviour during the Last Look window was firmed up following a public consultation. The buy side’s level of agreement with the latest adjustments about the Last Look principles vary. The chart below shows K&KGC’s poll among the buy-side trading audience at the 6th Alpha Trader Forum Global Summit 2018 on the 7th February 2018.





Adoption of the Code

With the official announcement of the GFXC in May 2017, the GFXC expected that it would generally take 6 – 12 months for market participants to review the Global Code and align, if necessary, their FX activities with the Global Code’s 55 principles. The number of Statement of Commitment accelerated in the months leading up to May 2018. Since then, the numbers have increased steadily. 

The first 60 buy-side firms committed to the Global Code are generally larger asset management firms that typically are associated with a local FX committee. In fact, 13 of the top 25 largest asset management firms have declared their commitment to adhere to the Global Code.

Additionally, the European Association of Corporate Treasurers (EACT), which strongly supports the Global Code, established a public registry to allow non-financial corporates to register their statement of commitment to the Global Code(4). The register is included in the Global Index(5) which provides a more comprehensive view of market participants' commitment to good practices. The working group would also like to see a similar register for the asset management industry.

In the beginning, European firms were slower to adopt the Global Code as MIFID II was consuming time and resources but now more attention is turning to the Global Code and firms are catching up over time. MiFID II is more onerous and prescriptive and, in many respects, touches on similar principles which are also reflected in the Global Code. While Spot is not included in the MIFID II scope it should be straightforward to adopt the same processes and procedures for ongoing adherence to the Global Code. 


Some ways firms can ensure ongoing adherence to the Global Code are:

  • Internal training workshops and e-learning initiatives to educate staff.

  • Role play to prepare the staff and regular active discussions surrounding  ambiguous situations.

  • Regular review of processes and procedures.



A few buy-side firms still object to adhering to the Global Code with the rationale that they were historically not the root cause to the misconduct on the FX market. The objective of the Global Code is however intended to apply to the entire FX market, including the buy side. This is why it is so important for the working group to outline the benefits for the buy-side community adopting the Global Code so everyone understands it is not just a question of costly time and resource processes but it can actually improve execution quality and lower costs of execution. Clarifying the proportionality concept will assist the smaller and less active firms in their considerations of signing up to the Code as they simply don’t have the same level of resources at hand as larger institutions.

GFXC work in progress

GFXC has recently stablished additional working groups to investigating further a) the role of “cover and deal” and similar trading models in FX markets and b) the role that disclosures can play in establishing clarity around the trading practices of market participants.


Background information about the Global Code

In May 2017, the GFXC launched the Global Code with the intention of promoting good practice in terms of transparency and ethics and improving the integrity of the wholesale FX market. The Global Code reflects a collective judgement as to what constitutes good practice in the FX market and was drafted during a 2-year consultation process taking into account thorough considerations by a broad set of participants in the industry. The Global Code provides a set of ‘global principles’ which market participants are encouraged to embed within their firm and commit to by signing a disclosure known as the ‘Statement of Commitment’. The GFXC owns the Global Code and is responsible for developing and maintaining it. The UK Financial Conduct Authority is supporting the Global Code as a guideline for the Senior Managers and Certification Regime.

For more information about the GFXC’s buy-side outreach group, please register for the 7th annual Alpha Trader Forum Global Summit FX Day

7th February 2019 in London. Click here

Copyright: K&K Global Consulting Ltd.

Further references:
(1) The GFXC:
(2) Foreign Exchange Contact Group (FXCG)
(3) Nex Markets, “The FX Global Code: changing transparency and behaviour”, September 2018
(4) The Global Code
(5) Global Index


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