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 6 th Alpha Trader
Forum Global Summit 2018 on
the 7 th February 2018.
28
www.buysideintel.com
Winter 2018