Some of the world's largest financial institutions have banned together to combat rising skepticism over the world's foreign exchange market, a move that follows billions of dollars in fines issued to banks for their alleged roles in manipulating benchmark rates and exchanging sensitive information.
Financial Times reports on Thursday (May 26) said the global code of FX ethics was introduced by the Bank for International Settlements (BIS) and looks to guide the FX markets towards "open, liquid and appropriately transparent" behavior.
The guide reportedly seeks to aid FX players in their navigation of complex ethical lines in the sharing of confidential information that can taint analysts' and traders' assessment and guidance. Players were also told to stop starting rumors about currency value fluctuations.
The standards apply to all levels of the global FX market, which sees $5.3 trillion worth of trade every day, reports added.
The Bank for International Settlements, which operates the Basel Committee on Banking Supervision, also recommended that FX market players heighten their transparency with regards to communication but while still protecting confidentiality. However, the guidance said, these players are also advised to share information with officials when requested, especially when a central bank is "acting for policy purposes."
The guidelines were developed by the BIS' working group on foreign exchange. Its chairman and assistant governor of the Reserve Bank of Australia, Guy Debelle, told reporters that the guidance is a critical step forward for the industry, which has suffered from a lack of trust.
"This lack of trust has been evident both between participants in the market but, at least as importantly, between the public and the market," he told the publication.
CLS Bank International Chief Executive David Puth also commented on the guidelines, which saw input from various central banks and 35 industry representatives, among other industry stakeholders, like banks, trading venues and settlement houses.
"We are really hoping to allow the protection of market color," Puth said. "Market participants should communicate properly but without compromising confidential information. All market participants feel as if market color is essential for a smooth market."