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good practice and increases client confidence in the market
participant. The European Central Bank and other central
banks have already ‘invited’ their FX counterparties to sign
up,” Gladwin says. “However, this also highlights a reputa-
tional risk, where an institution publicly adheres, then at
some point in time is shown to be in breach of some of the
principles.”
Monitor, measure, maintain
Major banks were quick to approach technology vendors
looking for guidance on efficient methods of compliance with
the Code. David Faulkner, managing director at Fluent Trade
Technologies, a provider of FX trading systems, explains that
better technology in a general sense is key for buy- and sell-
side firms aiming to comply with the Code through increas-
ing transparency and reducing risk.
“We work with many of the top tier banks, including 6 of
the top 15 FX banks, and we are in the process of onboarding
more. Over the past year most of our clients and prospects
have asked how our technology platform can help them ad-
here to the Code,” Faulkner says. “The answer is that market
data, plus trade and order information in microsecond res-
olution assists with best execution, timely risk management
and provides an audit trail of all market activity.”
As an example, Principle 17 of the FX Global Code of Con-
duct states that market participants employing the somewhat
controversial ‘Last Look’ method, should be transparent
regarding its use and provide appropriate disclosures to cli-
ents. Last Look affords liquidity providers such as banks the
opportunity to decline or accept a trade request, but industry
bodies like The Investment Association have raised concerns
recently that it is no longer acceptable due to misuse of
information.
The Investment Association highlighted various misuses
earlier this year, including pre-hedging during the Last Look
window, and trading based on information derived from
rejected trades or from a request for quotation in progress or
not yet won.
Faulkner adds that minimising latency within the whole
trading technology stack is key to ensuring Last Look hold
times are reasonable and acceptable to liquidity providers,
their clients and for adherence
to the Code. Ultra-low latency
“The faster a technology
connectivity also ensures that all
components of pricing and booking platform can manage risk
trades are completed faster –
processes, the more the risk is
from consuming market data and
connecting with credit systems, to
reduced.”
publishing prices and updating risk
DAVID FAULKNER, MANAGING DIRECTOR,
systems. “The faster a technology
FLUENT TRADE TECHNOLOGIES
platform can manage risk process-
es, the more the risk is reduced,”
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