RBA Dep Gov Debelle Details Focus Areas For FX Global Code Review

By Sophia Rodrigues

In a speech Thursday, the Reserve Bank of Australia’s deputy governor Guy Debelle spoke about focus areas for the Global Foreign Exchange Committee (GFXC) in its review of the FX Global Code.

The GFXC is committed to review the code every three years and while Covid-19 has resulted in a delay in conducting the review, Debelle said it is on track for completion by mid-2021 versus earlier deadline of December. Debelle is the chair of GFXC.

Debelle said the first focus area is getting greater adherence and commitment to the code from the buy-side. The committee considered whether a simpler version of the code could be developed for them but concluded that a single code remains the best way of ensuring common market standards.

One priority for the code review is to provide further guidance around certain trading practices, in particular last look and pre-hedging. Debelle said the GFXC’s surveys showed that buy-side generally considered disclosures around certain trading practices in these areas by sell-side to be poor.

The committee has noted that some elements of disclosures remain an issue and is aiming to develop solutions that will address issues in comparing information across different disclosure documents and facilitate access to disclosure information, Debelle said.

The GFXC is also considering reviewing the Code’s principles in light of the ongoing adoption of algorithmic execution (‘algos’) in the FX market.

Another area the committee is looking at is anonymous trading where usage has increased. The review will consider the roles played by venue providers and prime brokers, and whether the issues that can arise with this form of trading are adequately addressed in the code’s principles.

The committee has also recently been focussing on settlement risk. Debelle said the GFXC has concluded that it was appropriate to strengthen the code’s guidance in this area and will be looking to further emphasise the need for market participants to sufficiently monitor and manage their settlement risks.

--Contact: sophia@centralbankintel.com