Press Release: GFXC meets via videoconference to discuss the progress of the FX Global Code review, trading conditions and settlement risk

25 September 2020

The Global Foreign Exchange Committee (GFXC) discussed the general improvement in trading conditions in the foreign exchange market and reviewed settlement trends in the industry. The GFXC will strengthen its guidance on the management of settlement risk as part of its current review of the FX Global Code.

On a videoconference, the GFXC members reviewed recent trading conditions in the market, noting that many indicators of liquidity were approaching more normal levels, although the depth of market remains noticeably below pre-pandemic levels. Members also observed that volatility was beginning to rise, reflecting uncertainties such as Covid-19, the US elections, and Brexit. 

In emerging market currencies, conditions were more diverse, but had also generally improved. Recent issues in the Turkish lira highlighted the importance of market participants making the maximum effort to complete their settlements to avoid exacerbating liquidity strains or otherwise disrupting the market.

The GFXC again discussed settlement trends within the broader foreign exchange market and how the associated risks were being managed. Central banks will work with market participants to enhance surveys of market activity to regularly capture data on settlement methods. As part of its current review of the FX Global Code, the GFXC will strengthen its guidance on the management of settlement risk.

The Committee also discussed cases where currency controls in various countries caused pricing disruptions in Non-Deliverable Forwards markets. The GFXC requested Local Foreign Exchange Committees (LFXCs) to consider existing fallback mechanisms and whether there may be benefits to clarifying best practices for calculation agents.

The GFXC discussed the progress its working groups have made in addressing the focus areas of the Code’s review: buy-side engagement, disclosure, anonymous trading, algorithmic trading, and trade execution principles.

The Working Group on Buy-Side Outreach presented its response to feedback from some market participants for a buy-side version of the FX Global Code. The GFXC concluded that a single Code remains important in ensuring a common market standard on what constitutes good practice. The GFXC reemphasised that the Code should be applied by each market participant in a manner that is proportionate to the nature of their engagement in the market. The GFXC will develop guidance to assist firms in identifying those principles of the Code that are the most appropriate for them to evaluate when aligning their practices with the Code. Guy Debelle commented that “the GFXC will continue to engage with the buy-side community and to explore ways to make the Code and the Statement of Commitment even more accessible to buy-side firms.”

The review of the FX Global Code is due to be completed in the first half of 2021.

The GFXC is today releasing a short report authored by GFXC Co-Vice Chair, Neill Penney (Refinitiv) that discusses the operational challenges faced by the industry during the Covid outbreak.

Commenting on the report, GFXC Chair Guy Debelle said “The pandemic has been a major test for the foreign exchange industry, as it has been for many others. The FX industry demonstrated a high degree of operational resilience during this period, in highly volatile markets and with many in the industry working from home. It was good to see how useful and relevant the Global Code proved to be during this time. It helped guide market participants in their conduct and operational practices as they adapted to these unprecedented circumstances. The Code’s principles-based approach enabled it to be adaptable to the very different circumstances. I encourage more market participants to adopt it going forward given the demonstrated utility of the Code.”

The minutes from the meeting will be published in October.

For additional details on the GFXC and the FX Global Code, visit the GFXC website:

Press inquiries:

Cécile Lefort
Reserve Bank of Australia