1. Foreword

Foreword

I. What Is the FX Global Code?

This set of global principles of good practice in the foreign exchange market ¹ (Global Code) has been developed to provide a common set of guidelines to promote the integrity and effective functioning of the wholesale foreign exchange market (FX Market). ²

It is intended to promote a robust, fair, liquid, open, and appropriately transparent market in which a diverse set of Market Participants, supported by resilient infrastructure, are able to confidently and effectively transact at competitive prices that reflect available market information and in a manner that conforms to acceptable standards of behaviour.

The Global Code does not impose legal or regulatory obligations on Market Participants nor does it substitute for regulation, but rather it is intended to serve as a supplement to any and all local laws, rules, and regulation by identifying global good practices and processes.

The Global Code is maintained by the Global Foreign Exchange Committee (GFXC)

The GFXC was established in May 2017 as a forum bringing together central banks and private sector participants to promote collaboration and communication on FX matters, exchange views on trends and developments in FX markets as well as promote, maintain and update the Global Code.

The Committee assesses regularly whether particular foreign exchange market developments warrant specific revisions to the Global Code and when judged appropriate, undertakes a comprehensive review of the Global Code.

More information on the GFXC is available at www.globalfxc.org

The Global Code is organised around six leading principles:

Ethics: Market Participants are expected to behave in an ethical and professional manner to promote the fairness and integrity of the FX Market.
Governance: 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.
Execution: Market Participants are expected to exercise care when negotiating and executing transactions in order to promote a robust, fair, open, liquid, and appropriately transparent FX Market.
Information Sharing: Market Participants are expected to be clear and accurate in their communications and to protect Confidential Information ³ to promote effective communication that supports a robust, fair, open, liquid, and appropriately transparent FX Market.
Risk Management and Compliance: Market Participants are expected to promote and maintain a robust control and compliance environment to effectively identify, manage, and report on the risks associated with their engagement in the FX Market.
Confirmation and Settlement Processes: Market Participants are expected to put in place robust, efficient, transparent, and risk-mitigating post-trade processes to promote the predictable, smooth, and timely settlement of transactions in the FX Market

The Global Code and Applicable Law ⁴ Market Participants must be aware of, and comply with, the laws, rules, and regulations applicable to them and the FX Market in each jurisdiction in which they do business (Applicable Law). Market Participants remain responsible for having internal policies and procedures in place that are designed to comply with such Applicable Law.

The content of this guidance in no way supplants or modifies Applicable Law. Similarly, this guidance does not represent the judgement nor is it intended to bind the discretion of any regulator, supervisor, or other official sector entities with responsibility over the relevant markets or Market Participants, and it does not provide a legal defence to a violation of Applicable Law.

This Global Code should serve as an essential reference for Market Participants when conducting business in the FX Market and when developing and reviewing internal procedures. It is not intended to be a comprehensive guide to doing business in the FX Market. Certain terms used in this Global Code may have specific definitions or meanings under Applicable Law, which may imply certain duties or obligations in a jurisdiction.

Since this document is meant to serve as a code of good practice for Market Participants operating in different jurisdictions, it is not intended that the local meaning of terms in any one jurisdiction apply to the interpretation of this Global Code.

For the avoidance of doubt, terms used in this Global Code should be read according to their commonly accepted meaning as terms of market practice in the FX Market, and no specific legal or regulatory meaning should be imputed or ascribed to them.

Annex 2 contains a glossary of the capitalised terms featured throughout the Global Code

From time to time, the GFXC publishes reports to promote wider knowledge and understanding of particular aspects of the FX market and, where relevant, to highlight how they relate to the Principles of good practice described within the Code (“GFXC Reports”).

GFXC Reports contain useful explanatory material on the background and practical implementation of Code principles but are not part of the Code or the Statement of Commitment. These GFXC Reports are made available on the GFXC website.

II. To whom does the FXGC apply?

The FX Market ⁵ features a diverse set of participants who engage in the market in different ways and across various FX products. The Global Code is written with this diversity in mind and is expected to apply to all FX Market Participants that engage in the FX Markets, including sell-side and buy-side entities, non-bank liquidity providers, operators of FX E-Trading Platforms ⁶, and other entities providing brokerage, execution, and settlement services. While there can be no universal “one size fits all” approach, given the diversity of the market, the Global Code is intended to establish a common set of guidelines for responsible participation in the market.

For the purposes of this document, a “Market Participant ⁷” is a person or organisation (regardless of legal form) that:

is active in FX Markets as a regular part of its business and is engaged in the activity of the purchase or sale of one currency against another, or in transactions designed to result in gains or losses based upon the change in one or more FX rates, such as derivatives, whether deliverable or non-deliverable, either directly or indirectly through other market participants; or
operates a facility, system, platform, or organisation through which participants have the ability to execute the type of transactions described in (i); or
provides FX benchmark execution services; and
is not considered a retail market participant in the relevant jurisdiction(s).

The term includes any personnel who conduct the foregoing on behalf of a Market Participant.

As a guide, the following types of persons or organisations would generally be expected to engage in FX Market activities as Market Participants, as described in (i) – (iv) above:

financial institutions
central banks, except where this would inhibit the discharge of their legal duties or policy functions ⁸
quasi-sovereigns and supranationals, except where this would inhibit the discharge of their organisational policy mandate
asset managers, sovereign wealth funds, hedge funds, pension funds, and insurance companies
a corporate treasury department, or Corporate Treasury Centre ⁹ entering into external (non-group) transactions either on its own account or on behalf of the parent companies, subsidiaries, branches, affiliates, or joint ventures of the group it represents
family offices running treasury operations
benchmark execution providers
non-bank liquidity providers; firms running automated trading strategies, including high-frequency trading strategies, and/or offering algorithmic execution ¹⁰
brokers (including retail FX brokers); investment advisers; aggregators; and analogous intermediaries/agents ¹¹
remittance businesses, money changers, and money services businesses in their interactions in the wholesale FX Market
FX E-Trading Platforms
affirmation and settlement platforms
any entity classified as an FX Market Participant in the relevant jurisdiction(s).

As a guide, the following types of persons would not generally be expected to engage in FX Market activities as Market Participants, as described in (i) – (iv) above:

pricing display platforms
remittance businesses, money changers, and money services businesses in their interactions with retail customers
private banking customers trading as individuals or via personal investment vehicles
the general retail public.

The universe of Market Participants is considerably diverse in the type and level of engagement in the FX Market. The Global Code is expected to apply to all of these Market Participants, but the details of how it may apply can depend on their underlying activities. In practice, the steps that different Market participants take to align their activities with the principles of the Global Code will necessarily reflect 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, and will take account of Applicable Law ¹². Ultimately, the decision of what steps should be undertaken, and in what manner, resides with each Market Participant, reflecting an appropriate internal assessment.

Annex 3 presents a “Statement of Commitment” form. The Statement, like the Code, is voluntary and Market Participants may make use of it in different ways to support the objectives of the Code, enhancing transparency, efficiency, and functioning in the FX Market. The Statement is accompanied by an explanatory note providing additional background.

In addition to the Statement, Market Participants can make use of Disclosure Cover Sheets and Templates for Algo Due Diligence and Transaction Cost Analysis (TCA ¹³). Cover Sheets have been developed as a way of improving the accessibility and clarity of existing disclosure documents and can support Market Participants in meeting the range of disclosure and transparency principles within the Code. Like the Statement, use of Cover Sheets and Templates is voluntary. The GFXC website contains a suite of guidance materials on how to use and publish Cover Sheets and Templates.

1
FX Market: The wholesale foreign exchange market ↩︎
2
Footnote: The foreign exchange committees (FXCs) and central banks may continue to issue local standards where necessary to meet the specific circumstances of their markets. ↩︎
3
Confidential Information: Information that is to be treated as confidential, including FX Trading Information and Designated Confidential Information ↩︎
4
Applicable 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 ↩︎
5
FX Market: The wholesale foreign exchange market ↩︎
6
FX E-Trading Platform: Any system that allows Market Participants to execute trades electronically in the FX Market ↩︎
7
Footnote: The term Market Participant is generally used to refer to both firms and personnel, per the definition. However, in some cases it will be clear that a principle is by its nature more relevant to only one or the other. For example, certain principles deal primarily with business or firm-level policies and procedures rather than individual behaviours. The terms “firm” and “personnel” are occasionally used where principles focus on good practice by firms with regard to personnel in their capacity as such, and vice versa. ↩︎
8
Footnote: Note that transactions by central banks for the discharge of their legal duties or policy functions may be carried out by central banks themselves or through other Market Participants, including financial institutions and supranationals that may act on an agency basis, or otherwise, on behalf of the central bank. ↩︎
9
Corporate Treasury Centre: A Market Participant within a group of mainly nonfinancial companies that enters into external (non-Group) transactions as a Client (unless it explicitly declares otherwise) either on its own account or on behalf of the parent companies, subsidiaries, branches, affiliates, or joint ventures of the Group it represents. ↩︎
10
Algorithmic Execution: Trade execution through computer programs that apply algorithms. For example, at the most basic level, a computer program automates the process of splitting a larger order known as the ‘parent order’ into multiple smaller orders known as ‘child orders’, and executes them over a period of time ↩︎
11
Footnote: Agent: A Market Participant that executes orders on behalf of its Clients pursuant to the Client mandate, and without taking on market risk in connection with the order. ↩︎
12
Applicable 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 ↩︎
13
Transaction Cost Analysis (TCA): Analysis to evaluate the quality of trade execution – for example, by comparing the resultant price of an execution against a benchmark ↩︎