The European Central Bank (ECB) has become the latest central bank to endorse the Bank of International Settlements’ (BIS) FX Global Code, joining others including the New York Federal Reserve and the Reserve Bank of Australia. This signals that currency-trading institutions who do not sign up may well find their counterparties limited in future.
Whilst the ECB did not issue a legal mandate for its currency market counterparties to sign up to the Code, market participants have been invited to publicly declare commitment to the Code by May 2018, one year on from its publication. It is clear that the central banks are taking the Code very seriously, and rightly so.
The Code sets out a comprehensive set of best practice guidelines which outline how all market participants, regardless of institution type, should behave in order to uphold the highest standards of transparency and ethics in the wholesale FX market.
Since the final version of the Code was published two months ago, many institutions have already committed to adopting it. Those that haven’t will likely be spurred into action by the ECB’s firm encouragement.
This advocacy for an important set of principles is to be welcomed.