We have elsewhere noted the approaching publication of a number of market codes all designed to ‘improve’ behaviour in financial markets.
The Bank for International Settlements (BIS) is coordinating a worldwide code for foreign exchange through a committee of central bankers. Phase 1 was published in May 2016 and the final code will be published in May 2017.
The Bank of England is coordinating the development of a UK Sterling code through the Money Markets Liaison Committee which will cover money market deposits, repos, and securities lending and is also due to come into effect from May 2017.
Finally, there is the work of the Fixed Income, Currency and Commodities (FICC) Markets Standards Board (“FMSB”) which was set up in response to the recommendations of the Fair and Effective Markets Review (“FEMR”) to improve standards of conduct in wholesale FICC markets. The FMSB is developing a number of standards to address issues identified in the fixed income markets.
Together these codes (along with a global Precious Metals Code), replace the UK Non-Investment Products Code (NIPS Code) which has been the basis for dealing behaviour in the London money markets for many years and was last updated in 2011.
Treasurers operating in the UK will have conducted their trades under the NIPS Code although behaviour is so entrenched into market practice that not all treasurers may be aware of the formal code.
The events in financial markets in the early part of this century have resulted in a significant change in the regulatory approach such that, although these new codes will be ostensibly ‘voluntary’, adherence may not be discretionary. As Market Participants, corporates may be required to adhere to the new codes albeit on a proportional basis. As a result, corporates need to be aware of the codes and the ACT will continue to inform members as the codes (and exactly what they mean for corporates) become clearer.
The degree of adherence and the form of any declaration which may be required remains under discussion between regulators, the ACT and other international treasury associations. The ACT is working closely with the regulators to ensure that they understand:
The current draft of the FICC code can be seen at the FICC Market Standards Board site. The phase 1 draft of the Global FX Code can be found here.
We expect the UK Sterling Code to be available in draft by year end.
[su_box title="Join in" box_color="#51284F" radius="1"]If any treasurers feel able to contribute to the debate, perhaps by joining meetings with regulators, please get in touch with us at: technical@treasurers.org[/su_box]
