The Global Foreign Exchange Committee (GFXC) has today published an updated FX Global Code incorporating revised guidance on trading in the last look window, known as Principle 17.
The revised Principle 17 states that market participants should not undertake trading activity that utilises information from the client’s trade request during the last look window. It also describes the conditions under which certain trading arrangements (sometimes referred to as ‘cover and deal’) may be distinguished from this guidance. Two related examples have also been added to the Annex. Further details are available in a paper published today by the GFXC on the Request for Feedback.
Chris Salmon, Chair of the GFXC, said:
The revised guidance on last look demonstrates that the GFXC is committed to ensuring the FX Global Code keeps pace with a fast evolving market. This will support our objective of improving market practice and rebuilding trust in the FX market. With the last look consultation completed, the priority for the first half of 2018 is to promote widespread commitment to the Code.
David Puth, Vice-Chair of the GFXC and CEO of CLS, added:
Since the launch of the Code in May, the GFXC has been working to resolve outstanding issues and consistently identify new areas of focus to ensure that the principles evolve seamlessly with good market practice. In this instance we received meaningful market feedback to which the GFXC responded appropriately and in a timely manner. Our focus will now shift to encouraging the broad adoption of the Code by all major market participants during the first half of 2018.
The GFXC also agreed that it should continue to facilitate adoption of the Code as a global public good and members agreed to continue promoting the Code across all industry segments. The GFXC agreed to create a new associate member category to facilitate broad geographic adoption of the Code.
Roger Rutherford
Roger Rutherford, Chief Operating Officer at ParFX, commented:
We welcome the revised guidance by the GFXC relating to last look in FX. It is clear there is scope for misconduct to occur if trade information gained during the last look window is utilised by the liquidity provider to execute a trade, for example, or if the liquidity provider always intended to reject the trade in order to learn more about a counterparty’s position in the market. Such behaviour does not conform with the letter and spirit of the FX Global Code, and the revised language provides clear guidance in this respect.
We encourage liquidity providers in the FX market to be transparent with their customers and make their policies relating to last look clear in their trading agreements. This way, counterparties can easily decide whether to trade with a liquidity provider that offers last look pricing, or not.
There is universal agreement that the introduction of the FX Global Code has had a positive effect on the FX market. I think it has been instrumental in kick-starting important conversations around market behaviour, ethics and transparency. The industry is in a better place now than it was when the Code was initially launched, and I think 2018 will be a key year in which to redefine the rules in FX.
Separately, the GFXC has published minutes from the 14 November meeting and revised terms of reference to reflect changes designed to expand its global reach. A paper summarising responses to the FX Global Code Survey, which aims to measure the baseline level of awareness and adoption of the FX Global Code by market participants, has also been published.