FX Global Code Needs To Integrate EGS To Become Future Proof

The FX Global Code was released by the BIS Foreign Exchange Working Group in 2017 to offer a set of guidelines that will foster integrity and support the better functioning of the wholesale foreign exchange industry.

FX Global Code should integrate ESG

The FX Global Code includes a set of globally recognized principles that work in the FX market. These principles cover a wide range of areas, such as ethics, governance, execution, risk management, compliance, and information sharing. It also operates in other areas, such as settlement and confirmation.

The FX Global Code has played a significant role in improving practices across the FX industry. The code also promotes transparency and triggers debate in some strategic areas, such as transaction cost analysis.

However, there have been calls for the FX Global Code to undergo some changes. Over the past six years, many things have changed across the industry, and for the code to maintain relevancy, it needs to adapt o the fast-evolving market.

The adoption of the FX Global Code

The FX Global Code was published to promote integrity and promote best practices across the entire wholesale FX industry. The FX Global Code is voluntary in nature, and it has attracted compliance from more than 1,150 signatories.

Currently, there are only 84 asset managers, 30 corporate entities, and 15 pension funds that have registered for this code, according to the public register for the GFXC. There has always been an issue with convincing the end users to register for the code. However, the CFXC has been making strides to further compliance with the FX Global Code, and the move has continued to attract interest.

The chair of the GFXC, Andréa M. Maechler, noted that if changes were to be implemented in the FX Global Code, it would promote the adoption of the code. She also said that the Digital Proportionality Tool was bound to attract new signatories to the code, especially from the buy-side sector that was still underrepresented.

It is important that the market boost awareness around the code, especially from the buy-side companies and corporates. The code will allow these entities to assess their partners and liquidity provider processes and ensure that complied with the best practices in the industry. The move will also result in a more transparent and fair FX industry.

The ESG industry is venturing into the FX space, and it is becoming an important space. However, most players in the FX space focus more on the environmental and social aspects than the governance aspects. However, there needs to be better governance in transparency, regulatory compliance, and implementation of industry best practices by companies offering FX services.

The GFXC has taken measures to ensure that the FX Global Code applies in the ESG practices for these companies. The members that supported a possible partnership with rating agencies will guarantee that anyone that signs the code will be recognized as having met the governance aspect of their ESG commitments.