The FX Global Code was established by the recently formed Global Foreign Exchange Committee. The GFXC was created in May of 2017 and is a collection of central banks and private sector participants looking to establish standards for liquidity in the FX markets.
This has been a significant issue for banks and brokers with the numerous scandals regarding price fixing. Citibank, JP Morgan, HSBC, RBS, Barclays and Bank of America Merrill Lynch were fined a total of $6 Billion for FX Trading abuses. The collusion and price fixing sent shockwaves throughout the industry, and the creation of the GFXC was created absent a global regulator.
The purpose of the FX Global Code was not to act as a regulator but to supplement local regulations and laws. It is supposed to establish a level of transparency among the participants that should instill confidence in the public. It remains to be seen if an organization without any real authority will make a difference in an industry with a checkered past.
The GFXC hasn’t had any trouble recruiting members. Many of the banks that were involved in the scandal have signed up. We have also seen some familiar names on the side of forex brokers including LMAX Exchange, Saxo Bank, Sucden Financial, and Fastmatch.
The GFXC conducted an end of year survey of its 500 plus participants. The survey had a very high response rate of 67%. The respondents had an overall positive experience with other members, and many indicated that they would only deal with firms that adopted the FX Global Code and signed Statement of Commitment. There was a less favorable response when the issue of last look and markups.