Jan. 201
This paper is the result of considered debate amongst the members of the ACI FMA appointed leadership and members, and is intended to provide our unbiased replies to the issues discussed in the FEMR Consultation on FICC, prepared by the FEMR team. The ACI FMA welcomes the opportunity to engage with the FEMR on this subject.
The ACI believes that the debate about the role of a variety of subjects within the FICC markets is a positive development, and should take place in a public forum. The benefits of transparency on the debate are numerous, and include the need for the public to understand market complexity, and the benefits that the broader economy derives from having fair and effective markets in continuous operation. For this reason, the FEMR Consultation Document, and the responses from the various market participants to the document, will help the regulators, industry participants and the public to be better educated on the structure and uses of the fixed income, currency and commodity markets. The greater awareness that comes from this knowledge will assist the industry in assuring that best practices, especially ethical conduct, are followed.
Importantly, the ACI welcomes the elevated importance that the Consultation Document places on the behavior and ethical conduct of individual market participants. The FEMR Consultation Document reflects the need for individual behavior to be held to the highest standards of ethical conduct, and mentions the ACI Model Code.
Key Message
The ACI FMA is firmly of the belief that the ACI Model Code should be adopted formally by the industry on both the “buy-side” and the “sell-side” and applied across the globe. As is stated by the FSB Consultative Document on Benchmarking, for codes of conduct to be effective they must be adhered to. The use of a single, globally recognized, industry-wide, unbiased code, that addresses the specific issues of the foreign exchange market (among others) will provide a tremendous amount of value to this challenge. Disseminating conduct expectations and training staff on the uses of the sections of the ACI Model Code should be a minimum requirement for market participants. The ACI strongly endorses the application of the ACI Model Code to the ethical and behavioral issues addressed in the FEMR Consultation Document.
The ACI FMA also reminds the reader that the ACI Model Code makes a clear statement about the responsibilities of management and supervisors to ensure that codes of conduct are adhered to. Single-platform (company) and national/regional codes may sit alongside a global code, but there should be few (if any) differences in the application of these codes on market practice. Any differences increase the risk of ethical arbitrage amongst market participants, and give rise to the issues about which the Consultation Document was written. For this to be effective, the regulators need to agree to the terms, understand both the code’s guidelines and how they are applied, and allow individuals and institutions to be confident that following these guidelines will be accepted as appropriate.
Please click here for the FEMR Consultation Response-ACI Response.