Codes of Best Market Practice and Shared Global Principles by Australian Foreign Exchange Committee
Personal conduct
FX market participants should adopt high standards of conduct in their
actions and communications, both internally and externally.
FX market participants are also expected to conduct their business with
due skill, care and diligence, and to act in good faith.
Personnel with supervisory responsibilities should ensure that those
reporting to them have appropriate knowledge and expertise to carry out their
FX activities, as well as to comply with relevant laws, regulations, and
Guidance, all of which will require appropriate education and ongoing training
with respect to FX Policies.
Such training should contain practical examples and guidance on how FX
Policies should be applied specifically to their FX business.
Moreover, such personnel must embed an appropriate risk culture within
the firm, taking into account the letter and the spirit of the Guidance. In
doing so, FX Policies should clearly describe the personal conduct standards
that have been adopted, whether such standards are embodied in law, regulation,
or Guidance, against which the FX market participant and its personnel will be
held accountable.
The FX market participant or any of its personnel may be held
accountable for any breach of FX Policies that violate fair market practices,
damage the reputation of the FX market participant and profession or undermine
the integrity of the FX market.
In particular, FX market participants should have FX Policies and
surveillance mechanisms in place to cover personal conduct and behaviour, which
may include subjects such as dealing for personal account, entertainment, gifts
and gambling.
The FX Policy of a FX market participant containing its personal
conduct requirements should transcend individual businesses and activities such
that these standards apply even as FX businesses and technologies evolve. FX
market participants are responsible for having effective policies, processes
and controls in place in order to ensure that business is in fact conducted
within the framework of applicable personal conduct requirements. For example,
remuneration policies tied to conduct should be in place.
FX market participants are also
expected to have processes to deal with individuals who have acted
inappropriately, including reporting requirements to the relevant authorities
where applicable.
Individuals should be encouraged to ask their supervisor or other
designated personnel for guidance in the event that there is any uncertainty
regarding their conduct obligations.
FX market participants should also have in place effective escalation
procedures that enable individuals working for such FX market participants to
report instances of suspected unlawful or inappropriate practices and ensure
that issues surfaced through this channel are addressed promptly and
transparently. Individuals working for FX market participants should feel
confident that any information reported under these procedures will be dealt
with seriously and effectively, and that the reporting will not be to their detriment.
FX market participants should be accountable for the integrity of these
policies and for ensuring the protection of staff that make such reports.
Confidentiality and market conduct
FX market participants should have appropriate measures in place to protect
the anonymity of both the FX trading activity and identities of their FX
trading counterparties. There is a general expectation by all FX market
participants that information relating to their trading activity or positions
(“FX Trading Information”) will not be shared by their trading counterparties
with any external parties unless such information (a) is disclosed to agents,
market intermediaries (such as brokers and trading platforms) or other FX
market participants involved in, or facilitating, the execution, processing,
clearing or settlement of the transaction, (b) is reported, as may be required
(and as not otherwise prohibited) under relevant law, rule or regulation, to
market infrastructure providers (such as trade repositories or central counterparties),
(c) is disclosed with the consent of the counterparty or customer, (d) is
requested by a relevant regulatory or public authority or is otherwise required
to be publically disclosed under applicable law, rule or regulation, or (e) is
disclosed to advisors or consultants with the understanding that they hold the
information in the same manner.
In addition, FX market
participants may agree to a higher standard of non-disclosure with respect to
confidential, proprietary, and other non-public information of their FX trading
counterparties (“Designated Confidential Information”) which, at their
discretion, may be formalised in a written non-disclosure or similar
confidentiality agreement. In such case, the circumstances under which FX
market participants may disclose Designated Confidential Information will be
governed by applicable law and the terms of the confidentiality agreement.
Proper treatment of FX Trading Information and Designated Confidential
Information is essential for upholding market professionalism and integrity. FX
market participants should have appropriate measures in place, including
policies and procedures, to protect such information in accordance with the
standards described herein, both within the FX market participant and externally.
All market participants’ personnel have a duty to obey the requirements
of their institution’s FX policies and all the relevant laws and regulations
governing trading on non-public information and other market abuse in their
jurisdiction. FX market participants, therefore, should not, with intent or
through negligence, profit or seek to profit from the misuse of Designated
Confidential Information or FX Trading Information, however obtained, or
collude with others to make a profit or seek to make a profit by misusing such
information. “Misuse” of Designated Confidential Information or FX Trading
Information occurs when a party utilises such information in a manner that is
not permitted by law or regulation or under their internal policies or contractual
obligations where applicable.
Subject to the above-mentioned duties, laws and regulations, FX market
participants may engage in appropriate market making and risk management
activities, including sourcing liquidity in anticipation of customer needs or hedging
or mitigating exposure resulting from a client order. Under no circumstances
should FX market participants use individual trade and position information of
a counterparty or customer with the intent of adversely affecting the interests
of that counterparty or customer.
FX market participants have the obligation to ensure that:
• there are well documented policies and procedures in place and
sufficient systems and controls to protect FX Trading Information within the
dealing environment and other areas of the market participant which may obtain
such information, and that personnel have been trained with respect to such
policies. These policies should also prohibit counterparty and customer
anonymity from being circumvented through the use of slang or pseudonyms, both
externally and internally.
• their personnel have been trained to identify Designated Confidential
Information appropriately in accordance with internal policies and procedures
including the manner in which such information must be handled, and to deal
appropriately with situations that require anonymity and discretion.
• the communication technologies (for example, telephone, e-mail, chat
room and other communication tools) used to transmit FX Trading Information and
Designated Confidential Information are reasonably designed to be secure,
monitored and protected against unauthorized access. Appropriate steps should
be taken to prevent the leakage of such information through various kinds of
communication technologies.
• any misuse of FX Trading Information or Designated Confidential
Information is investigated promptly according to a properly documented
internal procedure.
FX market participants should not share information with each other
about their trading positions or individual trades with clients or other FX
market participants beyond that necessary for the execution of a transaction and subsequent transaction
life cycle events, ensuring that no confidential information is disclosed.
Furthermore, FX market participants should not pass on FX Trading Information
to other FX market participants that might enable those entities to anticipate
the flows of a specific client or counterparty, including around a fix. It is
acceptable to share with customers a view on the general state of and trends in
the market (often referred to as providing market color). However, any market color
given regarding market activity should be sufficiently aggregated and
anonymised so as to not disclose FX Trading Information or Designated
Confidential Information. It is not acceptable to disclose information on
individual trades, specific counterparty names and other non-public
information, except in accordance with the standards set out above regarding FX
Trading Information or Designated Confidential Information.
Finally, FX market participants should exercise careful judgment in
assessing whether any information they receive (including, but not exclusive
to, counterparty information) is true and accurate. FX market participants
should have policies that require their personnel to refrain from passing on
information that they know or suspect to be misleading. Such policies should be
reasonably designed to ensure that any communication, whether to
counterparties, customers, other market participants or other external parties
have a reasonable basis, are fair and balanced, and do not contain any
inaccurate or misleading information. These policies should also include the
circumstances in which it may be acceptable to inform customers about a rumour
prevalent in the market, and the requirements as to how that communication
should be handled.
Policies for execution practices
FX market participants should put in place clear internal guidelines
and procedures regarding their execution practices. FX market participants should
not engage in any practices which could be held to constitute market
manipulation, abuse, fraud, or anti-competitive behaviour. Where FX market
participants are handling orders, whether for counterparties or customers, they
should establish and enforce their internal systems, processes and procedures
to address potential conflicts of interest arising from managing such order
flow.
All firms should identify any potential or actual conflicts of interest
that might arise when undertaking FX transactions, and take measures either to
eliminate these conflicts or control them so as to ensure the fair treatment of
counterparties. Practices that would (a) undermine the reputation of both the
traders and FX market participants for which they work and (b) potentially
expose parties to legal risks should, in each case, be well understood and
avoided to the extent possible. When a market participant agrees to act as an
agent on behalf of (and not a principal trading counterparty to) a customer,
the market participant should not enter into a transaction which they 8 know,
or ought to have known, would result in a conflict of interest to that
customer, unless such conflict is disclosed to the customer, the customer
consents to it and, if applicable, it is resolved in accordance with local law,
rules, and/or regulations. In accordance with the FSB’s Foreign Exchange
Benchmarks Report’s recommendations, FX market participants should establish
and enforce their internal guidelines and procedures for collecting and executing
fixing orders. If a firm engages in fixing transactions, those transactions
should be priced in a manner that is transparent and is consistent with the
risk borne in accepting such transactions. Finally, FX customers (including
asset managers passively tracking an index) should conduct appropriate due
diligence around their foreign exchange execution, including assessing the
suitability of FX reference rates used, and be able to demonstrate that to
their own clients if requested.
without any risk or responsibility
without any risk or responsibility
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