Adhering to the FX code of conduct, an obvious recommendation to all treasurers

It's astonishing how few treasurers actually adhere to the FX Code of Conduct (drawn up by the Global FX Committee), even though adhering to it seems like a "no brainer". In a world where fraud, disputes and other complaints are on the increase, supervising the handling of OTC-type FX financial instruments seems like proof of professionalism and respect for best practices. To consider this code is to accept transparency, fair practices and integrity. So, if you haven't yet read it and signed up, hurry up and do so!

Why a code of conduct?

Why an FX Code of Conduct? Prior to the GFC, in 2008, conduct was not considered by market users as a critical issue. Consequently (among many others), regulators have supported the development of a code of conduct to prevent scandals, frauds and disputes between market dealers and corporates. This code set up basic principles, rather than detailed rules, to address the best way to behave on the FX market. The idea behind is to build a better future for FX markets and not only to define what the sell-side should do or not. They have defined 55 key principles around 6 main pillars (i.e. ethics, execution, governance, risk management and compliance, information sharing, confirmation and settlement processes). You can download this code on www.globalfxc.org/docs/fx_global.pdf

Voluntary adherence

It is based on a voluntary basis and corporates can decide or not to adhere to this code. However, ATEL and the European association of treasurers (i.e. EACT) have worked on this code and fully support it. We do believe it can help all market players, including corporate treasurers. Now, only a few corporates have adhered to the code. On the sell-side, circa 300 financial institutions have adhered to the code. We would like to encourage all corporates to also express their support to these principles. On the EACT website, you can find a platform to indicate your adherence. The code presents a useful and valuable checklist, emphasizes the need to understand the relationship between banks and corporates and eventually it gives an interesting FX jargon. As often mentioned by Jean-Marc Servat, Chair of EACT, we shouldn’t ask why adhering to the code but rather why we shouldn’t sign it. I guess it is important to define how to well-conduct when dealing FX instruments on the market. In my view, it can’t do any harm and treasurers will not lose anything by adhering to this code. Conversely, it would demonstrate we, as corporate treasurers, fully support best practices and principles to safeguard our businesses and relationships with banks. It will send a strong signal to all banking counterparties that treasurers expect good behavior on FX markets, especially in a very volatile economic environment and at the time transparency is a key virtue. A corporate should not accept to deal with banks not having yet adhered to this code. Do use you power of negotiation to push banks to adhere to these principles, if not yet done. “Any can hold the helm when the sea is calm”, as said by Publicius Syrus long ago. But when the economic markets aren’t calm anymore, it will be useful to lean on key principles to rule relationships. And even if you automate your FX management via a Currency Management Automation (CMA) solution like KANTOX, you can adhere to it and demonstrate the principles you believe in and intend to see respected. ?As always in the past, the memories of crisis, like the crazy period we faced since 2008, fade and vanish when the situation seems to be back to normal. We count on all our members to support this valuable initiative. If you want to adhere, as some of us already did, please visit the EACT FX global code register to state your commitment (https://www.eact.eu/fx-global-code ).

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Fran?ois Masquelier, Chair of EACT

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July 2024 – Luxembourg

Disclaimer: This article was prepared by Fran?ois Masquelier in his personal capacity. The opinion expressed in this article are the author’s own and do not necessarily reflect the view of the European Association of Corporate Treasurers (i.e., EACT).

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