THETRADETECHFX DAILY from the floor world , with each bank bringing in a private sector representative . Pruthi is now the GFXC member as the ECB ’ s private sector representative , and as such has played an instrumental role in developing the latest version of the Code , which came out in 2021 .
“ The first version of the code was fairly well received , but there were still some questions around certain topics . The idea was that the code should become a living document , so in 2019 we started working
on the new version , adding in some of the things that the market was asking for , such as more guidance in pre-hedging , anonymous trading , disclosures , transaction cost analysis ( TCA ) and so on .
“ The 2021 version also strengthened its guidance significantly on last-look hold times [ a practice whereby a participant receiving a trade request has a final opportunity to accept or reject the request against its quoted price ], and as a result most liquidity providers have removed hold times altogether . This has been the biggest discussion in the FX market for the past five years , and the updated guidance should make the whole market fairer .
“ If you read through the code , and through LP disclosures , you ’ ll see there ’ s a spectrum there . But disclosure information is now all available at a central repository , all you have to do is click to understand how your flow is handled . This is tremendous from a transparency perspective .”
Progress has also been made in the field of algo disclosures and TCA templates – not all of which may have been published widely yet , but many LPs have done this already . And there are also now venues which are curating liquidity pools with code compliant liquidity – meaning that every participant in the pool has signed up to the code – a huge step forward .
“ All in all , there has been some solid progress made over the past few years ,” says Pruthi .
Looking ahead So what still needs to improve , for the next round of updates ? “ The idea is to keep pace with the markets . But the bar to make changes to the code shouldn ’ t be too low . Any division or addition to the code triggers a huge amount of work for all signatories – my own trading compliance team spent the best part of six months before we could realistically attest to the code . We shouldn ’ t take that lightly .”
That being said , GFXC will conduct a survey among market participants in Q3 and this is likely to be used to see if there are any immediate gaps that need filling . At present , the survey plans to focus on the effects of the July 2021 revision , and reflect on the impact of those changes . But there is still some work to be done .
“ I think there is less awareness in general around algo disclosures and templates , and that needs to change . If we could get to a place where all counterparties have a standardised disclosure , that would make it much easier for a buy-side participant to make comparisons .
“ We also want a robust , fair , openly transparent FX market , and that can only happen when data access is democratic . At the moment there are data haves , and data have-nots , and that is something the GFXC leadership is actively considering at the moment .”
So how should FX heads of desk be preparing their desk for any changes ? “ You know , it ’ s more about making your traders aware of all the changes that have been made , make sure they have access to all the disclosures and that they understand the implications of their execution choices . The code provides a framework to evaluate these execution choices and helps you to know what to expect from your counterparties and liquidity providers .”
The official newspaper of TradeTech FX Europe 2022 TheTradeNews . com 15