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Global FX code: what it means for corporate treasurers

Neill Penney

18 Apr 2017

Corporate treasurers. Photographer: Rafael Marchante
Photographer: Rafael Marchante

With the foreign exchange industry adopting the new Global FX code of conduct, what will be the impact for corporate treasurers and their FX transactions?

The new FX Global Code of Conduct represents the industry’s last chance to write its own rule book.

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After a number of recent scandals, the voluntary code aims to restore confidence through the promotion of a robust, fair, liquid, open and transparent market that applies across the entire global wholesale FX industry.

Corporate treasurers

The move will mean changes to the FX industry that will have an acute impact on how banks and corporate treasury departments interact.

In my recent webinar hosted by Treasury Today, I outlined what the new global code means and why it may be a good time for treasurers to take a deeper look into their FX activity.

Watch video — We are Thomson Reuters, we are foreign exchange

FX Global Code of Conduct explained

The first phase of the code was published May 2016 and the second, final phase will be published in May 2017.

The code of conduct is organized around six guiding principles as follows:

  • Ethics
  • Governance
  • Execution
  • Information sharing
  • Risk management and compliance
  • Confirmation and settlement processes

View webinar recording FX Global Code: How will it affect the Buy Side?

FX corporate treasurers quote image

In order for the code to be as broadly applicable as possible, it is written with proportionality in mind. Adherence is a public declaration of support and, whilst the exact form is yet to be determined, it may include:

  • Public register
  • Independent certification

Adherence is based on an “all or nothing” approach; cherry-picking is not allowed.

While the code is not regulation, it defines conduct expected by regulators, particularly around “common sense” good conduct, and customer due diligence and knowledge. Regulators intend widespread adoption of the code.

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Treasury impact

Most of the principles in the code address banks’ conduct towards their customers.

The main consideration for corporate treasurers will be the extent to which their company publicly supports the code. How important do you regard reinforcing good conduct in the industry?

The objective for companies is not only to ensure that treasury is prepared for the new rules, but also to look at ways to begin leveraging best in class analytical tools to conduct a prudent transaction cost analysis of all deals.

Corporate treasurers
FXall in Eikon QuickTrade RFQ

This should also involve proving best execution, tap into new trading strategies, leverage performance measurement tools in order to demonstrate their worth, meet due diligence requirements and enhance performance.

The webinar considers these areas and will help you think about your level of adherence and your role in promoting adoption by your counterparties.

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