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Enhancing Transparency and Mitigating Risks in FX markets: GFXC's Review of the FX Global Code

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20 October 2024
Ruslan Babikov

In the fast-paced world of foreign exchange, almost every participant—from financial institutions to asset managers, marketplaces and technology providers —recognizes the significance of the FX Global Code and the ongoing efforts of the Global Foreign Exchange Committee (GFXC). As part of its commitment to keeping the Code relevant, the GFXC is currently seeking feedback on proposals arising from its Three-Year Review. This initiative is not just a formality; it’s a vital step in ensuring that the Code reflects the evolving landscape of the FX market.

The GFXC’s review focuses on key areas that have emerged from extensive consultations with major market participants, including local FX committees and the BIS Markets Committee. The proposed amendments aim to clarify Market Participants’ responsibilities in mitigating FX Settlement Risk and to enhance transparency in FX transactions and data usage.

Key Areas of Focus:

Mitigating FX Settlement Risk: One of the primary goals of the proposed changes is to provide clearer guidance on how Market Participants can effectively manage FX Settlement Risk. By refining this aspect of the Code, the GFXC aims to equip participants with the best practices needed to navigate potential settlement-related challenges.

Enhancing Market Transparency: Transparency is crucial in the FX market, and the GFXC is keen to promote it through proposed amendments to the Disclosure Cover Sheets for Liquidity Providers and Platforms. These changes focus on data disclosures that will help participants make informed decisions about their FX business relationships, ultimately fostering a more transparent trading environment.

The GFXC is actively engaging with a wide range of stakeholders, including central banks, corporate treasury departments, custodians, and FX E-Trading Platforms, to gather diverse insights. This collaborative approach ensures that the proposed amendments are well-informed and reflective of the industry's needs.

In tandem with these developments, Celent has recently published a research report titled "Navigating the Future of FX Technology: Trends and Insights." This report delves into trends in the FX market and underscores the importance of the FX Global Code. It highlights how responsible practices, transparency, and risk mitigation are not just buzzwords but essential components of a thriving FX ecosystem.

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