The FX Code of Conduct for money managers, brokers and other foreign-exchange market participants has taken a back seat — and possibly in some cases, no seat at all — to meeting MiFID II requirements, sources said.
"I have gotten no questions, no nothing" on the FX code, said Willa Cohen Bruckner, partner, financial services, Alston & Bird LLC, New York. "I don't hear people talking about the code. It could be how our clients are prioritizing this; it could be brokers not making a big deal out of this. ... A lot of people aren't even acting as if this is a concern."
The code was released by the Bank for International Settlements and 21 central banks on May 25.
Alex Dunegan, founder and CEO of money manager Lumint Currency Management, Boston, said the lack of industry awareness "rings true. … Some have never heard of (the code); some have but only indirectly. It's mostly because it's been all eyes on MiFID II; that's dominating all parts of the industry — sell side, buy side."
Added Ian Battye, chief investment officer, currency, at Russell Investments in Seattle: "We've asked our bank counterparties and peer asset managers" if they adhere to the code. "I think part of it is, do they know there's a code? I was generally struck by the lack of awareness" among the firm's FX counterparties, "how many people haven't even downloaded the principles and looked at them."
The code is a voluntary set of six principles of acceptable behavior for any firm, government or individual participating in the global FX market. Those principles, according to the code, require:
- Ethical behavior, to avoid conflicts of interest;
- A governance framework for market participants, including internal oversight and controls by signatories;
- Fair and transparent execution of trades;
- Guidelines for what data can be disclosed and what must be confidential, such as client information;
- Risk management and compliance, with regular reporting and maintenance of robust compliance mechanisms; and
- Efficient and transparent confirmation and settlement processes.
The complete code is available on the website of the Global Foreign Exchange Committee, an industry group representing central banks and FX market participants.