Bank of England welcomes FCA's decision to recognise the FX/Money Market Codes and sees it as a timely reminder to sign up

Following market consultation, the FCA announced that it was formally recognising the FX Global Code and the UK Money Markets Code on the 26th June. These are the first codes to be recognised under the FCA’s codes recognition scheme which was announced last year, to recognise industry codes for unregulated markets and activities. Both these codes have been written by and are owned by the industry and reflect their views of best practice.

While these are unregulated activities and markets the recognition of their respective codes will make them quasi-regulated as the FCA says that individuals who are subject to its Senior Managers and Certification Regime (SM&CR) will need to meet its requirements for market conduct, for both markets. “Behaviour that is in line with an FCA recognised code, such as the FX and MM Codes, will tend to indicate a person subject to the SM&CR is meeting their obligation to observe ‘proper standards of market conduct’.”

The FCA added that while it will not supervise firms or individuals directly against these codes in unregulated markets, it will make sure that firms that it regulates meet their governance and systems and control obligations, including under the SM&CR. The FCA expects firms and individuals to consider both the spirit and the letter of code provisions to make sure they fully meet ‘proper standards of market conduct.’

The Bank of England welcomed the FCA’s announcement stating that recognition of the Codes:

• Strengthens accountability by embedding the Codes in the SM&CR;

• Delivers a key milestone of the 2015 Fair and Effective Markets Review and;

• Provides a timely reminder to those who are yet to sign up to the FX and Money Market Codes of the benefits of doing so.

As the FCA now recognises that behaviour that is in line with an FCA recognised code will tend to indicate an individual’s adherence to ‘proper standards of market conduct’ for SM&CR purposes, it effectively extends those standards to non-financial market participants who adopt those codes, adoption of which was encouraged by the Bank of England last year.

In February 2018, the Bank of England issued its own Statement of Commitment to the two codes, as well as the Global Precious Metals Code, when acting as a market participant in the relevant markets and encouraged all market participants to adhere to those codes. Six other members of the European System of Central Banks simultaneously issued Statements of Commitment to the FX Global Code. It is conceivable that non-adoption of these Codes by major market participants will eventually become a barrier to operating in those markets.

If your firm requires assistance in adopting and implementing the FX Global Code please contact FMCR contact@fmcr.com. FMCR is a technical consulting firm with a team of FX market practitioners (former traders, structures & quants).