Don't lie, don't cheat, don't start rumors, says new FX code

Thu May 26, 2016 11:34am EDT
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By Patrick Graham

LONDON (Reuters) - The first global code of conduct for currency trading has banned dealers from lying and starting false rumors as part of new guidelines aimed at rebuilding trust in a foreign exchange market plagued by scandals and accusations of manipulation.

The document, released on Thursday after evolving from a handful of regional codes used previously, focuses largely on the detail of how banks deal with clients' orders and what market participants can and cannot say to one another.

On those issues alone, it includes dozens of individual directives organized under 11 broader "principles" as well as an extended annex of specific examples of appropriate and inappropriate formulas for discussing market moves.

"The foreign exchange industry has suffered from a lack of trust," Reserve Bank of Australia Assistant Governor Guy Debelle, who chaired the panel of 21 central banks working on the document since last July, told reporters on a conference call. "The market needs to rebuild that trust."

The code is part of the industry's response to charges of market manipulation and misuse of confidential customer order information which saw seven of the world's top banks fined around $10 billion at the end of a huge global inquiry last year.

The second phase of the code will be completed in 12 months, Debelle said, and will cover further aspects of execution, trading and platforms, prime brokerage and governance, as well as risk management and compliance.

Thursday's FX guidelines, however, raised questions about enforcement and how the code will be policed.

"The code is not regulation. We are establishing principles," Debelle said in a question-and-answer session. "I think as adherence mechanisms are developed over the next year or so, we'll provide greater guidance."   Continued...

Currency signs of Japanese Yen, Euro and the U.S. dollar are seen on a board outside a currency exchange office at Narita International airport, near Tokyo, Japan, March 25, 2016.  REUTERS/Yuya Shino