Safer, Better FX with
the Global Code


Ross Long/Chris Paizis

Head: Foreign Exchange, Absa Group
| Head: Client FX and International Banking,
Absa Group


How the FX Global Code keeps foreign exchange transactions secure and in line with global best practice – and why Absa insists that all parties adhere to it

The financial crisis of 2008 left a lingering sense of distrust towards the world’s financial institutions. Understanding that effective change can only come from within, the industry developed the FX Global Code: a set of global principles of good practice in the foreign exchange (forex, or FX) market.

“The Global Code was developed by central banks and market participants from 20 jurisdictions around the world, and it speaks to the behaviours necessary for a transparent, efficient and client-friendly FX market,” says Chris Paizis, Head of Client FX and International Banking at Absa Group. To that end, the Global Code provides a common set of guidelines that supports a robust, fair, liquid, open and appropriately transparent market.

“Our organisation is committed to ensuring we act in a way that reassures our franchise that every interpretation of the Code is treated in a conformed manner, that reaffirms our behaviour through all client channels,” adds Ross Long, Head of Foreign Exchange at Absa Group.

Leading principles for global FX

The Global Code is organised around six leading principles: ethics; governance; execution; information sharing; risk management and compliance; and confirmation and settlement processes. “In South Africa, the Global Code is coordinated through the Reserve Bank,” says Paizis, who sits on the South African Reserve Bank’s South African Foreign Exchange Committee (SAFXC). “Our domestic body includes representation from the large banks, second-tier banks, the buy side, the Banking Association South Africa, the treasury outsourcing community, as well as the ACI Financial Markets Association (a leading global trade association) and other relevant forums. This is all coordinated globally via a central committee.”

Paizis adds that South Africa is one of a handful of African countries to have adopted the Global Code. The country has been an integral part of the Global Code since the beginning because of the complexity and liquidity of the national FX market.

The Global Code aims to ensure that FX clients are treated fairly by liquidity providers. “As a bank, we’re doing this with the client at the centre of it,” says Paizis. “We ensure that, in our dealings with clients, we always reflect the principles ourselves while also holding others to account. In our dealings with, for example, the hedge fund and asset management communities, we ensure that we highlight our adherence to the Global Code and we encourage theirs.”

The same applies to treasury outsourcers or financial intermediaries. In this regard, Absa insists that any treasury outsourcer with whom the bank trades must adhere to the Global Code. “That’s carried through from the SAFXC, and in our dealings with client bodies like the Association of Corporate Treasurers.”

A need for self-regulation

Paizis sees the Global Code as a living document. Changes to the Code are infrequent and influenced by global ACI committees.

“Absa monitors and adapts to changes in the Global Code through a robust governance model comprising of sales, trading, and compliance stakeholders,” says Long. “We are committed to protecting our clients and providing competitive, transparent and fair execution.”

As it stands, the Global Code is skewed towards – and largely driven by – the banking community. However, at its core, it aims to regulate all liquidity providers in the FX market. “It’s often assumed that the banks are the big liquidity providers, and they do play a large role, but increasingly one has other bodies – like hedge funds, for example – who do not necessarily adhere to the Global Code yet and are very active as liquidity providers. Hopefully, over time, the Global Code will encapsulate all the real participants in the FX market,” says Paizis

In the meantime, Paizis says that Absa’s clients are already seeing the benefits of the Global Code. “It’s adding the right developments in terms of FX systems. And the FX market is getting bigger every day, so the need for self-regulation and adherence is not going to go away.”

Ross Long/Chris Paizis

Head: Foreign Exchange, Absa Group
Head: Client FX and International Banking, Absa Group

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