ETHICS
LEADING PRINCIPLE:
Market Participants are expected to behave in an ethical and professional manner to promote the fairness and integrity of the FX Market
The ethical and professional behaviour of Market Participants underpins the fairness and integrity of the FX Market 1FX Market: The wholesale foreign exchange market. The exercise of judgement is central to acting ethically and professionally, and Market Participants (meaning both firms and their personnel) should be guided in doing so by the high-level principles below, both when applying the specific guidance in the Global Code and at all times when participating in the FX Market.
PRINCIPLE 1
Market Participants should strive for the highest ethical standards
Market Participants should:
- act honestly in dealings with Clients 2Client: A Market Participant requesting transactions and activity from, or via, other Market Participants that provide market making or other trade execution services in the FX Market. A Market Participant can act as a Client in some instances while making markets in other instances and other Market Participants
- act fairly, dealing with Clients and other Market Participants in a consistent and appropriately transparent manner
- act with integrity, particularly in avoiding and confronting questionable practices and behaviours
Maintaining high standards of behaviour is the responsibility of:
- firms, which should promote ethical values and behaviour within the organisation, support efforts to promote high ethical standards in the wider FX Market, and encourage involvement by personnel in such efforts
- senior and front-line management, which should be pro-active in embedding and supporting the practice of ethical values within the firm’s culture and be prepared to give appropriate advice to personnel; and
- personnel, who should apply judgement when facing ethical questions, expect to be held responsible for unethical behaviour, and seek advice where appropriate. Personnel should report and/or escalate issues of concern to appropriate parties internally or externally, having regard to the circumstances.
PRINCIPLE 2
Market Participants should strive for the highest professional standards
All Market Participants share a common interest in maintaining the highest degree of professionalism and the highest standards of business conduct in the FX Market.
High standards of conduct are underpinned by:
- having sufficient knowledge of, and complying with, Applicable Law 3Applicable Law: With respect to a Market Participant, the laws, rules, and regulations applicable to it and the FX Market in each jurisdiction in which it does business
- having sufficient relevant experience, technical knowledge, and qualifications
- acting with competence and skill
- applying professional judgement in following the firm’s guidelines and operating procedures, including, but not limited to, methods of execution, record keeping, and ethical behaviour; and
- engaging in efforts to strive for the highest standards of professionalism in the wider FX Market.
Firms should have personnel who are appropriately trained and who have the necessary
experience to discharge their employment duties in a professional manner.
PRINCIPLE 3
Market Participants should identify and address conflicts of interest.
Market Participants should identify actual and potential conflicts of interest that may compromise or be perceived to compromise the ethical or professional judgement of Market Participants. Market Participants should eliminate these conflicts or, if this is not reasonably possible, effectively manage them so as to promote fair treatment of their Clients and other Market Participants, up to and including abstaining from undertaking the relevant activity or action due to the conflict of interests.
Personnel should be aware of the potential for conflicts of interest to arise and comply
with their firm’s policies in these areas.
Contexts in which conflicts may arise include, but are not limited to:
- situations where personal or firm interests may conflict with those of a Client or other Market Participant, or where such a conflict arises for the Market Participant because the interests of one Client may conflict with those of another
- personal relationships
- gifts and corporate entertainment; and
- Personal Dealing 4Personal Dealing: Where personnel deal for their personal account or indirect benefit (for example, for their immediate family members or other close parties)
Market Participants should put in place appropriate and effective arrangements to eliminate or manage conflicts of interest. This could include:
- segregation of duties and/or reporting lines
- establishing information barriers (for example, physical segregation of certain departments and/or electronic segregation)
- altering the duties of personnel when such duties are likely to give rise to conflicts of interest
- providing training to relevant personnel to enable them to identify and handle conflicts of interest
- establishing declaration policies and/or records for identified conflicts of interest and personal relationships, as well as for gifts and corporate entertainment received; and
- having policies and controls on Personal Dealing.
Where it is concluded that a specific conflict of interest cannot reasonably be avoided or effectively managed (including by ceasing to undertake the relevant service or activity), Market Participants should disclose sufficient details of the conflict to enable the affected parties to decide beforehand whether or not they wish to proceed with the transaction or service.
GOVERNANCE
LEADING PRINCIPLE:
Market Participants are expected to have a sound and effective governance framework to provide for clear responsibility for and comprehensive oversight of their FX Market activity and to promote responsible engagement in the FX Market.
Appropriate governance structures should be in place to promote and support the principles set out in this Code. Different firms’ governance structures may vary in complexity and scope. The precise structure adopted should be commensurate with the size and complexity of the Market Participant’s FX Market activities, and the nature of the Market Participant’s engagement in the FX Market, taking into account Applicable Law 5Applicable Law: With respect to a Market Participant, the laws, rules, and regulations applicable to it and the FX Market in each jurisdiction in which it does business.
PRINCIPLE 4
The body, or individual(s), that is ultimately responsible for the Market Participant’s FX business strategy and financial soundness should put in place adequate and effective structures and mechanisms to provide for appropriate oversight, supervision, and controls with regard to the Market Participant’s FX Market activity.
The body, or individual(s), that is ultimately responsible for the Market Participant’s FX business strategy and financial soundness should put in place:
- an operational structure with clearly defined and transparent lines of responsibility for the Market Participant’s FX Market activity
- effective oversight of the Market Participant’s FX Market activity based on appropriate management information
- an environment that encourages effective challenge to senior management charged with day-to-day responsibility for the Market Participant’s FX Market activity; and
- independent control functions and mechanisms to assess whether the Market Participant’s FX Market activities are conducted in a manner that reflects the Market Participant’s operational risk and conduct requirements. Such functions should have sufficient stature, resources, and access to the body or individual(s) that is ultimately responsible for the Market Participant’s FX business strategy and financial soundness.
In implementing the above, consideration should be given to the types of activities that the Market Participant engages in, including if the Market Participant engages in the provision or usage of Electronic Trading Activities 6Electronic Trading Activities: These activities may include operating an FX E-Trading Platform, making and/or taking prices on an FX E-Trading Platform, and providing and/or using trading algorithms on an FX E-Trading Platform. or Prime Broker services.
PRINCIPLE 5
Market Participants should embed a strong culture of ethical and professional conduct with regard to their FX Market activities.
Market Participants should, among other things:
- expect senior management to be highly visible to relevant personnel of the Market Participant in articulating and modelling the desired practices, values, and conduct
- take appropriate steps to promote and reinforce all relevant personnel’s awareness and understanding of (i) the values and the ethical and conduct standards that should be adhered to in their engagement in the FX Market; and (ii) Applicable Law 7Applicable Law: With respect to a Market Participant, the laws, rules, and regulations applicable to it and the FX Market in each jurisdiction in which it does business that is relevant to them (see Principle 25); and
- make all relevant personnel (including senior management) aware that disciplinary or other actions may result from unacceptable behaviours and transgressions of the Market Participant’s policies.
PRINCIPLE 6
Market Participants should have remuneration and
promotion structures that promote market practices
and behaviours that are consistent with the Market
Participant’s ethical and professional conduct
expectations.
Firms’ remuneration and promotion structures should encourage practices and behaviours that are consistent with the firm’s ethical and professional conduct expectations; they should not incentivise personnel to engage in inappropriate behaviours or practices, or to take risks beyond the overall business risk parameters of the Market Participant.
Factors that should be taken into account include but are not limited to:
- the mix of pay components, such as fixed and variable
- the form and timing of payment for the variable pay component
- how such structures align the interest of relevant personnel with the interests of the firm over both short- and long-term horizons; and
- appropriate mechanisms to discourage inappropriate practices or behaviours
PRINCIPLE 7
Market Participants should have appropriate policies
and procedures to handle and respond to potentially
improper practices and behaviours effectively.
Market Participants should maintain policies and procedures, supported by effective mechanisms, to (i) provide confidential channels for personnel or external parties to raise concerns about potentially improper practices and behaviours and (ii) investigate and respond to such reports as appropriate.
Specifically, firms should be clear with relevant personnel and external parties about where and how to report concerns about potentially improper practices and behaviours (including but not limited to cases of illegal, unethical, or questionable practices and behaviours) confidentially and without fear of reprisal or retribution.
Reports of potentially improper practices or behaviour of the Market Participant should be investigated by independent parties or functions. Such parties or functions should possess sufficient skills and experience—and be given the necessary resources and access—to conduct the investigation.
Market Participants should complete the investigation and determine the appropriate outcome within a reasonable time frame, taking into account the nature and complexity of the matter in question. Escalation within the firm and reporting outside the firm may be appropriate before an investigation is concluded. The reports and results should be brought to the attention of the appropriate individuals within the Market Participant, and if appropriate, to relevant regulatory or public authorities.