A group of global standards-setters reportedly completed a new set of principles for trading in the foreign-exchange market, capping a two-year effort to improve transparency after a series of collusion scandals at major banks.
“The Bank for International Settlements, a Switzerland-based consortium of central banks, released the final version of the code of conduct for the global foreign-exchange market,” the Wall Street Journal said.
A group that included central banks, asset-managers and banks has been working on the code since 2015. The first phase was released in May 2016, the WSJ reported.
The code is aimed at raising transparency and fairness in six areas: ethics, governance, execution, information sharing, compliance and trade settlement. The code was a response to global investigations into fraudulent behaviors among foreign-exchange traders at several major banks, the WSJ.com.
"Public trust was shaken as a result of the global financial crisis, and there were specific situations in the global FX market that caused public trust to be further undermined,” said David Puth, chief executive of foreign exchange settlements firm CLS Group. “We felt that the FX market was in need of a large effort to help restore trust.”
Industry players said the code was its last chance to head off full formal regulation of the $5 trillion a day market after a scandal over market manipulation and misuse of client information that saw seven major banks fined around $10 billion at the end of a huge global inquiry in 2015, Reuters reported.
Most of the document was published a year ago and the final version's main additions include measures that ask banks and a new generation of electronic traders to provide more details on the algorithms they use and their trading processes.
It also addresses and launches a formal consultation over the controversial "last look" practice that allows banks and other liquidity providers an extra chance to reject trades after receiving requests to execute.
The 75-page document lays out 55 high-level principles - rather than hard rules - for how participants in the world's biggest financial market should conduct business.
While it remains nominally voluntary, Thursday's package of documents also outlined a framework that some of the officials working on the project said should mean all major market players will commit to conforming to the new code.
All of the major central banks involved said they would commit to sticking to the code's guidelines and would demand it of their counterparties in the $5 trillion a day market which is the world's largest.
(Newsmax wires services contributed to this report).
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