FX Global Code of Conduct -why should a corporate sign?

This session explored the benefits of a corporate signing the FX Global Code of Conduct. It took place on 14th May 2019. The session was chaired by Damian Glendinning.

  • A presentation from T Julian Gladwyn and Nick Downes of Axiom Global Advisors to a panel of senior corporate treasurers
  • A Q&A between the panel and the Axiom team
  • A peer group discussion (held under the Chatham House Rule, Axiom not included)

Chair’s commentary

This discussion took place two days before the announcement of significant fines imposed by the European Union on a group of banks for malpractice in the FX markets. These fines – imposed on banks we would all usually trust – and the discussion below, highlight several points we would all do well to consider:

  • When handling FX, corporate treasurers often just focus on the rates obtained. This is an area where there is a lot of scope for doubtful practice: we need to be vigilant.
  • We all think we have good practices, but this is often in the form of gentlemen’s agreements and general intentions. It can be beneficial to codify what is acceptable and required, both from our own teams and our trading counterparts.
  • The FX Global Code of conduct is an attempt to have all market participants agree and adhere to a set of principles. It is a code, and it is a set of principles – it is not prescriptive. I encourage all corporate treasurers to take a look at it, and see objectively how we stack up against these principles.
  • ·As usual, these concerns apply even more in emerging markets, where the lack of liquidity and transparency adds to the challenges

Axiom Global Advisors  – presentation

The FX Global Code

The FX Global Code is a set of 55 globally agreed Principles of Good Practice in the Foreign Exchange Market, developed to provide a common set of guidelines to promote the integrity and effective functioning of the wholesale Foreign Exchange Market. It was developed by a partnership between Central Banks and Market Participants from 16 jurisdictions around the globe, under the supervision of The Global FX Committee (GFXC). www.globalfxc.org

  • The FX Global Code (FXGC) was launched in May 2017 after an extensive two year, industry wide consultation by the ‘Markets Working Group’ which was represented by the all market participants.
  • There is a perception on the buy side that the code is about stopping poor behaviour and bad practices by banks. In fact it’s about good practices that apply to all market participants. It is as much for corporates and asset managers as it is for banks.

The code has six leading principles:

o   Ethics (1-3)

o   Governance (4-7)

o   Execution (8-18)

o   Information sharing (19-23)

o   Risk & Compliance (24-41)

o   Confirmation & Settlement(42-55)

  • From a corporate perspective, it is important to understand that many of these principles are not applicable to them. And that they probably already have existing policies and procedures that already comply
  • Execution was the biggest topic of debate between market participants in the lead up to the launch.Lack of transparency was the major bone of contention together with banks’ assumptions about ‘accepted behaviour’. The FXGC narrows the gap between the buy and sell side’s understanding of their relationship and covers issues such as: FX disclosure notices and agreements; Principal or agent; Order handling, for example is pre-hedging allowed? (This  can be expensive, for example  in October 2017, Mark Johnson, the former HSBC banker was jailed in the USA when the pre-hedging of a $3.5 billion currency transaction which took place in 2011 on behalf of Cairn Energy resulted in $8 million additional profits for the bank. The defence claimed the client was aware that advance trades would occur).  The FXGC is designed as a framework for understanding the bank: client relationship to avoid similar issues arising.
  • ·Why should a corporate sign the FXGC?

Why should a corporate sign the FXGC?

o   It provides an excellent framework for managing your relationship with FX counterparties.

o   It allows you to benchmark your existing policies and procedures against global best practice.

o   As the code evolves, it allows your policies and procedures to evolve with it.

o   It demonstrates high ethical standards and CSR

  • Current corporate involvement in the FXGC includes Members of the FX Market Practice Group: Airbus, Ericsson, Rolls Royce, Shell Treasury & Swiss Re
  • Corporate signatories: Air Liquide Finance SA, Airbus, Bayer AG, Daimler AG Financiere Remy Cointreau , Shell Treasury Centre, Siemens AG, Total SA
  • In the words of Jean-Marc Servat, Chair of EACT (European Association of Corporate Treasurers) “Smaller corporates can also benefit from the Code. It may not be as important to them in terms of their actual trading, but there are several sections in the Code that deal with risk management, compliance and governance and can help them build a more robust governance structure around their Treasury unit.”
  • Signing up for the code is voluntary and there are a number of registers, including the European Association of Corporate Treasurers – https://www.eact.eu/fx-global-code

Q&A session with corporate treasury panel & Axiom team

QUESTION: Please expand on your role and what your organisation does.

ANSWER: We provide consultancy and training services relating to the FXGC, from a corporate perspective this includes identifying which principles apply to them and providing a gap analysis between their current policies and procedures against the code, together with recommendations to enable them to sign.  We have worked for market participants and Central Banks and between us have extensive experience in front to back office activities.

QUESTION: To date only twelve or thirteen corporate have signed up – why do you think people aren’t signing up?

ANSWER: There is the perception that the code is just for banks and also that complying with the code is expensive. It needn’t be.  It’s not necessarily a huge amount of work, as much of it is already in place in most organisations.  Of the 55 principles, it’s up to you to decide which are applicable, based on your activity, and many of them do not apply to corporates.

QUESTION: You made the point that everyone can benefit, but even as treasurers of large corporations, what we do is fairly simple. Why should we bother getting into details such as information fees and mark up practices when we do competitive bidding to get the right price?

ANSWER: It’s the framework. It allows you to have better conversations with your counterparties.

QUESTION: Do corporate treasuries care whether their counterparties have signed (if the price is right) – have they taken banks off their panel if they haven’t signed?

ANSWER: I am aware of asset managers who have removed counterparties who haven’t signed the code.

QUESTION: Can you talk about bad behaviour from banks?

ANSWER: I think the ethics of the FX industry have improved greatly in recent years. But I can give you an example of how the code adapts to practices that have been questioned.  The latest version of the code covers ‘last look’ (the practice of banks holding an order and looking to see how the market is moving before accepting or rejecting it).

Corporate Treasury Panel – Peer Group discussion (Axiom Team ‘left the room’)


We recently started a preliminary examination of the code at the request of our Risk Committee. A lot of things need to be checked and analysed for treasury policy. If you are just a plain back to back player does this make a big impact and are your banks insisting on it? From our side, it’s not clear that it should be a priority. Once your name is there (as a signatory) – you need legal compliance checks and balances – that’s a big ask. How do people align groups outside central treasury?


 We signed. My opinion is that it is an intention and you can’t expect 100% application.The biggest challenge is 24 hour dealing so some execution isn’t handled centrally and it’s hard to confirm adherence. Intention is important – but the further away from the centre it gets the harder it is. 

QUESTION: Did you use consultants?

ANSWER: it depends where you start. We already had a lot in place, it wasn’t difficult. Also it’s a security, the banks have had ten years of regulations and have changed a lot – this is a good way for us to match the banks. My guys treat the banks in a professional way – with our volumes we can have market impact.

Another reason to sign up is to show intention, not just treasury, but the company as a whole – when we centralised treasury globally under a group treasury with a common platform from a settlement and risk point of view, we used the code to explain (to colleagues) why we wanted to make these changes. Plus the way our banks treat us in or discussions with them. We saw some easy picks that can be done quickly.

QUESTION to ONE: What is the reaction when you have a difference from the code?

ANSWER: Our key observation is that the code puts an emphasis on rules and checks and balances. We have a lot of gentleman’s agreements with banks – how do we demonstrate this if anyone wants to check? How do we demonstrate adherence? How do we put things in place to convince legal and compliance that we are doing what we should? There are eleven principles that do not apply and lots of others that need a policy adjustment on how Treasury should function, I’m not sure how to address that at a structural level.

QUESTION: Do you have staff there? For me when audits happen, it helps to have staff there.

ANSWER: We have external audits and external consultants for peer alignment. We know where we are, we aren’t alarmed, it’s a good initiative, we’d like to be a name – there are just a lot of stops to get there.

COMMENT: two things, firstly, these are principles, not rules. If you see them as rules it prevents common sense – don’t get too bogged down and audit should look at it that way too, or it’s more trouble than it’s worth.

Secondly, we are looking at the corporate and commercial risk that is being handled outside central treasury. They don’t have the same exposures and the principles would not be applied in the same way. Reduce it and see what is applicable for each type of business. It is not uniform across all departments. Scale and see as principals.

COMMENT:  Different behaviour is appropriate under different circumstances. For example, front running, everyone understands when it applies and can be done for example large FX transactions for M&A. You need to answer delicate questions.


I haven’t been exposed (to the code) prior to this call. Itis interesting that it is out there. I need to take time to read it. I am confident that much of it we are already engaged in, but I will evaluate it.


I am aligned with (THREE),we have looked at it from a distance. We all know that if you look at mechanics, for example looking at financial information on SAP…it’s important that it’s best effort not compliance. Ultimately will it mean that bank pricing will be more efficient…has it made a difference?

ANSWER: The pricing on our platform is already good.  It’s much more about the dialogue if something goes wrong.

COMMENT: A lot of the discussion (when the code was established) was about people trading off benchmark & margin, so having a better understanding of how a benchmark is fixed and margin calculated should deliver a better price. But most of us do competitive bidding so we don’t care how margin is determined.

Even with FXAll they have a pricing algorithm based on trust and volumes so it can’t be quantified but I’m sure we are all getting the best price. Better reputation should mean thinner margins when setting up the system.

COMMENT: Sometimes they aren’t as sophisticated as you think. They also aren’t smart enough and charge too little. We get calls when a bank has under priced. For us, we want their liquidity.  It’s a dialogue. By having the code’s backing you are a trusted person & need to talk to people not machines.

COMMENT: I agree. It is super tight pricing – but that’s harder when you get to Emerging Markets – they are way off. Really local markets have no such conduct.  It’s a challenge even for the major banks – that’s where it’s much more needed.


We operate a centralised treasury like the others. We are probably already adhering to it (the FXGC) especially when using online platforms. I haven’t researched it but see benefits in bringing subsidiaries into line and giving a good risk framework. Plus CSR. I will review and see how and when to implement. It’s about the time teams have and the time needed to review.


My view is a lot of it says what we do anyway and if we don’t we should. It’s not transformational – but I suggest you look at it – especially if it leads to market participants being held to a higher standard of conduct.  It’s a good checklist and health check and we should play an active role in engaging with it.

Nick Downes – co-founder Axion Global Advisors.

Nick has over 30 years of experience in the Global FX market. He is the CEO of FX Advisory Ltd, a specialist consultancy that applies his extensive knowledge of FX, e-Commerce and Technology to help clients optimise their FX Trading workflows and gain meaningful business insights based on FX Data Analytics. Prior to this, Nick was Head of Electronic Distribution at Commerzbank AG, building the bank’s eFX capability and coverage distribution. During his career, he has held senior Sales, Trading and eFX roles at Bank of America Merrill Lynch, Citibank, UBS and EBS.

Julian Gladwin, co-founder Axiom Global Advisors.

Julian has worked in Financial Markets for over 30 years. He is an Associate at Elixirr, the challenger consultancy, bringing his broad knowledge of financial market solutions and risk mitigation to the firm.Prior to Elixirr, Julian was a Director of Relationship Management at CLS, the FX settlement financial market utility. Julian’s career of leading client relationships spans FX, Risk, Transaction Banking and Securities Services. He has held multiple international roles at Standard Chartered Bank, Northern Trust, Lehman Brothers and PaineWebber

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