Central Banks Set Out New Rules to Prevent FX Market Manipulation

foreign-exchangeForeign exchange market committees of the developed world’s major central banks have agreed to issue new rules that will provide global FX market code of conduct, Reuters reported on Tuesday.

The 8-page document signed by representatives of the world’s major central banks will sit as a global guide, on top of existing codes, on what traders can say or not say about the world’s biggest financial market.

“FX market participants are advised to apply the global ‘high-level principles’ set out in this document to the FX market as it evolves, including with respect to new FX products, processes and technologies,” the document, dated March 12, said.

The code seeks to categorize confidential information and provide more guidance on what traders can say to each other about the market, banning traditional slang usages, in order to prevent market manipulation.

The document stated that FX market participants should not pass on FX Trading Information to other FX market participants that might enable those entities to anticipate the flows of a specific client or counterparty, including around a fix.

It also prohibits counterparty and customer anonymity from being circumvented through the use of slang or pseudonyms.

“It is acceptable to share with customers a view on the general state of and trends in the market. However, any market color given regarding market activity should be sufficiently aggregated and anonymised so as to not disclose FX Trading Information or Designated Confidential Information,” the document pointed out.

“These policies should also prohibit counterparty and customer anonymity from being circumvented through the use of slang or pseudonyms, both externally and internally,” the code said.

 

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