THETRADETECHFX DAILY from the floor
The evolving role of the FX Global Code
Why does the FX Global Code matter for buy-side firms beyond being a‘ tick-the-box’ exercise? A common misconception is that the code was designed and targeted towards the sell-side. While it doesn’ t cover cases that fit every specific situation, the principles themselves and the spirit of the code help provide guidance that benefits all market participants. By adopting it, we gain clarity on market conventions and best practices, which leads to more productive conversations with our counterparties. Beyond that, there are several real and immediate benefits for both small and large buy-side firms. For smaller firms it’ s about awareness and education- a shared language and framework helps participants better understand what constitutes fair and professional conduct. It also offers a clearer picture of what buy-side firms can and should expect from their counterparties. Larger firms gain process rigour- identifying operational improvements across trading, settlement, and risk management. Adopting the code translates directly to better execution quality and fewer disputes with market makers. Finally, signing the code signals to clients and counterparties that your firm operates with integrity.
What practical changes could be seen on FX desks as a result of the code? The FX market has historically operated with grey areas around order handling and execution transparency. The FX Global Code has changed that. After major banks adopted the code, sell-side improvements were notable. We saw more consistent communication standards and clearer practices around client information handling, stop-loss orders and pre-hedging. These practices contribute to greater consistency and transparency in FX markets, which is beneficial to all participants. The path to adherence drives some equally tangible benefits for a buy-side trading desk. The self-assessment tool( available on the Global FX Committee’ s website) can help identify opportunities for improvement, regardless of how well established the processes or how experienced the trading team. Undertaking the review, especially for the
The TRADE sits down with KANIEL GOMES, senior trader, global fixed income and currencies at RBC Global Asset Management, to unpack the importance of the FX Global Code for buy-side firms, how the code has impacted FX desks and execution and any potential barriers to adoption.
first time, forces desks to thoroughly assess every aspect of their processes and controls. Additionally, having the code as a resource allows for comparison to industry best practice. At RBC GAM, the takeaways from our first assessment almost ten years ago included the development of settlement risk controls, a formalised documentation of execution policies and a knowledge-building framework for junior members of the team. The result was more consistent internal practices, clearer expectations with counterparties and a stronger foundation for onboarding new talent.
How will it improve execution quality and counterparty selection? The code allows buy-side firms to move counterparty selection towards objective, measurable criteria grounded in shared principles. The shared understanding for both clients and dealers means less time is spent on disagreements. It also gives buy-side firms the vocabulary and framework to know what they’ re entitled to receive( transparency, fair treatment, clear communication standards, and more confidentiality related to orders) ensuring everyone operates within consistent standards. With the polices clearly documented, market participants have a codified set of guidelines to point to when they feel they have not been treated fairly.
Are there any areas where the code falls short in your opinion? The FX Global Code is a pretty thorough document, and its 84-page length has perhaps deterred buy-side adoption as firms perceive the process of adherence to be a major undertaking. While it does require some time investment, the resources provided by the Global Foreign-Exchange Committee help tremendously. These tools offer firms a roadmap to adherence and example case-studies for how others have navigated the process. It’ s worth mentioning that each company’ s adherence and implementation will be different as the concept of proportionality allows firms to apply the code according to their size and scope of operation. That said, a streamlined guide specifically designed for firms without dedicated trading desks could further reduce barriers to adoption. Such a resource would help smaller participants access the code’ s benefits without feeling overwhelmed by provisions designed for complex trading operations. Having said that, we found that the process of getting to adherence was well worth the effort.
20 THETRADETECHFX DAILY