Background
Following widespread allegations and findings of misconduct in various wholesale financial markets, codes of conduct and market practices for targeted over-the-counter (OTC) markets were created in 2017, specifically the FX Global Code, the UK Money Markets Code and the Global Precious Metals Code.
These codes, by their nature, contain principles to guide best practice in their various markets and are therefore deliberately generic in their recommendations. Equally, while they occasionally overlap, they are focused upon their individual asset class.
Produced by °ϲʹ in 2022, in order to be consistent with the high standards of integrity and professionalism that exist in the core financial markets, the °ϲʹ FMA Handbook, Our Best Practices and Further Guidance: Reinforcing Industry Codes (°ϲʹ FMA Handbook) is intended to support these three codes of conduct* by reinforcing their best practice guidelines. It is also designed for global application across OTC wholesale markets, including foreign exchange, money markets, precious metals and related derivatives. °ϲʹ FMA’s Committees and Working Groups maintain a regular and comprehensive review procedure that will ensure the °ϲʹ FMA Handbook keeps pace with technological and structural changes in relevant markets, as well as with ethical best practices, through updates and revisions when and where necessary.
°ϲʹ FMA Handbook
Having produced the first global code of conduct for financial markets back in 1975, °ϲʹ supported, informed and shaped the discourse around ethical behaviours in the foreign exchange market, as well as in other interlinked financial markets, which were combatting similar issues.
Given our vast experience on these matters, °ϲʹ FMA has always encouraged its members to acknowledge, respect, adhere to, and be longstanding proponents and influencers of the highest standards of ethical and professional behaviour by all participants in financial markets.
For more information on the FX Global Code, developed and maintained by the Global Foreign Exchange Committee, please click on this link:
For more information on the UK Money Markets Code, developed and maintained by the Bank of England, please click on this link:
For more information on the Global Precious Metals Code, developed and maintained by the London Bullion Market Association, please click on this link:
*The current version of the °ϲʹ FMA Handbook relates to these versions: FX Global Code (July 2021), UK Money Markets Code (April 2021) and Global Precious Metals Code (April 2018).
Purpose
While the FX Global Code, UK Money Markets Code and the Global Precious Metals Code provide guidance for market participants trading in those products, and despite apparent differences in how these assets are traded, there are many common issues that affect all OTC wholesale markets. Equally, many market participants are active in more than one of these assets at any given time, therefore it is logical and helpful to have a single unified source that supports their first point of reference, the relevant codes of conduct.
Therefore, the intention of the °ϲʹ FMA Handbook is to provide more detail around the principles in these three codes of conduct, to shed further light on some of the key conduct issues market participants may face, and to help shape their response. It also seeks to reinforce the minimum standards of behaviour demanded by their peers, managers, customers, counterparties, as well as local and global authorities.
Best practice compliance is important in order to maintain orderly and efficient markets, therefore it is essential that all participants in the dealing process (front to back office) are aware of, and comply with, both the letter and the spirit of the relevant codes of conduct. °ϲʹ strongly recommends that all market participants promote mandatory adherence amongst their staff and service providers, to the appropriate codes of conduct supported by the °ϲʹ FMA Handbook, and that this document be utilised as and where necessary. Participants should also recognise the element of proportionality that exists in the supported codes, thus, while there are sections of the codes that may not be appropriate to their business or regular tasks, they should adhere to those principles that are relevant.
Example
As an example of the level of detail included in the °ϲʹ FMA Handbook, please check below extracts from its Article 21 and extracts of Principle 38 of the FX Global Code with regard to dealer mandates and authorisations to trade.
FX Global Code, Principle 38:
“… Market Participants should maintain trader or desk mandates, which detail what products each trader is permitted to trade, as well as post-trade surveillance in order to detect exceptions from the trader’s mandate.
…ĝ
°ϲʹ FMA Handbook, Article 21:
“Individual dealers’ roles and authority to trade must be set out in writing so there is no ambiguity as to the transactions, instruments, markets or trading platform in which the dealer is permitted to trade. Control of all personnel engaged in the dealing function, including support staff, is the responsibility of management.
All staff should be trained adequately and be made explicitly aware of their and their employer’s responsibilities and legal obligations. Market participants should clearly set out, in writing, a mandate detailing authorisations and responsibilities within which dealing and support staff should operate.
These descriptions, which should also govern relationships with all market participants, and their support functions, and should ensure that any individual who commits a firm to a transaction has the appropriate authority to execute that transaction. Descriptions might include:
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General dealing policy including reporting procedures, the confidentiality policy and guidance on the avoidance of unethical trading
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Persons authorised to deal
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Local licensing requirements for dealers
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Instruments that can be dealt
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Limits on open positions, mismatch positions, stop loss limits etc.
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Relationships with brokers and broking platforms/banks
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Information/communication duties
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Other relevant guidance considered appropriate
…ĝ
Where to Access the °ϲʹ FMA Handbook
my°ϲʹFMA.com
This Portal has been launched by °ϲʹ FMA to allow °ϲʹ FMA members and non-members to have access to relevant content produced by our Association.
The first document uploaded in my°ϲʹFMA.com is the °ϲʹ FMA Handbook, so all users will have unlimited access to its latest version, with useful tools and features to assist with their navigation through the document.
From April 2023 onwards, members of °ϲʹ FMA and of °ϲʹ National Associations will be able to use my°ϲʹFMA.com to access the °ϲʹ FMA Handbook for free, provided the °ϲʹ National Association has their membership fees to °ϲʹ FMA in order.
Non-members will be able to access the °ϲʹ FMA Handbook, subject a subscription fee payable to °ϲʹ FMA (release date to be announced).
Please click here to access my°ϲʹFMA.com:
ELAC
We have uploaded the °ϲʹ FMA Handbook into our E-Learning, Attestation and Certification Portal, for continuous training, certification, and proof of adherence to Industry Codes, with an aim to further reinforce the educational activities on the Portal, which already include the FX Global Code, the UK Money Markets Code and the Global Precious Metals Code.
Therefore, current users of ELAC can access and study the °ϲʹ FMA Handbook, as part of their ELAC subscription. As happens with the other Codes, °ϲʹ FMA will be adding Self Assessment Questions and Market Practice Cases related to the °ϲʹ FMA Handbook in ELAC, as they will help subscribers with the study of this content and support their understanding of how these guidelines can be applied in practice.
If your entity is not yet a subscriber to ELAC, please contact °ϲʹ FMA on education@acifma.com so that we can contact you to provide further information about the Portal.
For more information on ELAC, please visit this section of our website:
/index.php/elac
Adherence to the °ϲʹ FMA Handbook
March 2023:
The Indonesia Foreign Exchange Market Committee (IFEMC) has officially launched the 4th Edition of its Market Code of Conduct - Brown Book in Indonesian language, a document that formulates the standards currently used by market participants in Indonesia.
The Brown Book Edition IV (December 2022) now refers to the FX Global Code (July 2021) and to the °ϲʹ FMA Handbook, and is a guide to behaviour and action for every market player transacting on the domestic financial market, and aims to regulate behaviour and improve the discipline and integrity of market players in the financial market in Indonesia which includes Senior Management, Management, Dealers and Brokers directly involved directly in financial transactions on a daily basis. This reference also provides a basis for how market participants behave in accordance with the principles and practices prevailing in international financial markets.
To access the Brown Book Edition IV, please click on this link: