Ahead of the publication of the latest review of its UK Money Markets Code in June, the Bank of England’s Simon Dolan recognised that the challenge was to ensure the Code remained up to date. Speaking at the ACT’s annual conference, he told attendees that the primary object of the Code is to promote trust and integrity in the money markets.
“Given the importance of the short-term markets in UK financing, investment and liquidity, we set up a group of market participants seven years ago to bring together a set of best practice standards, with the objective of promoting trust and integrity within the UK money markets.”
We have really pushed the transparency around setting these best practices and it works when everyone comes together
The ensuing Code established a set of principles that market participants would uphold, ensuring ethical and professional behaviour, risk management practices and controls, and appropriate levels of governance and senior levels of oversight were in place within companies. “We have really pushed the transparency around setting these best practices and it works when everyone comes together,” he said.
He emphasised that it was a market-driven initiative rather than one dictated by the Bank of England. “Those that have signed up to the Code are saying that these are the standards we uphold for ourselves, and these are the standards that we expect of the people that we transact with in the markets,” he added.
More than 230 UK market participants have now signed the Statement of Commitment to the Principles, and another 11 organisations have published statements of broad market-wide support.
The Code was first updated in April 2021 to reflect new remote working practices, the benefits of diverse and inclusive money markets teams, the ongoing development of environmental, social and governance criteria, and the increasing electronification and use of platforms in money markets. The 2024 update further underscores the importance of each of these areas in shaping financial market activity in the future.
Recent developments in UK money markets have also been addressed in the Code. For example, the Code introduces a process for UK market participants in the event of unplanned bank holidays. It also reminds UK market participants of the importance of making every reasonable effort to settle transactions conducted in UK money markets. The language has been strengthened to reflect this, with a new section on settlement discipline. Lastly, the Code highlights the emergence of digital assets in the securities lending market.
Embracing best practice, whether it is the FX code or any other code, is more than a tick-box exercise
These themes are mirrored in the Foreign Exchange Global Code. According to Lisa Dukes, co-founder of Dukes and King, a member of London Foreign Exchange Joint Standing Main Committee and the UK private sector representative to the Global FX Committee, the FX Global Code aims to foster greater transparency and resilience among those active in the wholesale foreign exchange markets.
“Embracing best practice, whether it is the FX code or any other code, is more than a tick-box exercise. It is about safeguarding our interests as corporates and contributing to a fairer market environment for everybody,” she said. “By aligning to these principles, we can collectively elevate the standards of our industry and foster a more transparent and resilient working place.
“In the long run, this will make our roles as corporate treasurers easier.”
These views were echoed by Christopher Rich, general counsel of the Financial Markets Standards Board. “There are a lot of similarities in terms of what we do to bring market participants together to drive incremental improvements in market standards.”
He added that the FMSB had been established to address frustrations over poor conduct in the wholesale financial markets.
Philip Smith is editor of The Treasurer
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