aci briefing...2 aci briefing i news from the financial markets association i q1 2015 vol.19, issue...

ACI – The Financial MarketsAssociation unveiled the updated ACIModel Code for 2015 in front of 1700attendees at the 54th World Congressin Milan, along with a new interactivee-learning and self-certification portal.

The Model Code places a renewed focuson education and ensuring individuals areeducated on the appropriate ethicalstandards and behaviour expected of themby their employers and the market. Theupdate is part of ACIFMA’s continuedresponse to the industry being hit byscandals of FX manipulation and Libor.ACI’s Committee for Professionalism,chaired by David Woolcock, reviewed andapproved The Model Code 2015, addingin new procedures and practices aroundprime brokerage, last look, aggregation,high frequency trading, dark pools andalgos. It also offers advice on bestpractice during times of extreme marketvolatility such as that which followed the

removal of the 1.20 EUR/CHF floor onJanuary 15. The CFP also revamped various sectionsof the Code as a result of changes in theregulatory world and the Fair andEffective Markets Review (FEMR). Speaking at the World Congress GeneralAssembly, ACIFMA President MarshallBailey said, “The new 2015 ACI ModelCode is ready for release. In it, we notonly continue to provide practicalguidance on ethical conduct in wholesalefinancial markets, but we also providenew guidance on certain areas like ‘lastlook’, which is so important to theelectronification of markets.”

A Living Code

The Model Code is now available onlineto all ACI FMA members globally.Members need to enter their email detailsto download the new version, which alsoallows them to be alerted when further

updates are made. The Model Code was lastupdated in February2013. Woolcockanticipates that it will beupdated more frequentlygoing forward in orderfor members to stayabreast of the rapidlychanging regulatory andmarket environment. “Itshall always remain awork in progress, andbalance the calls for high-level, principles-basedguidance with thefrequent demands to

provide more precise guidance,” he says. The CFP also plans to extend the Code tocover other market participants, such ascorporates and wealth and assetmanagement firms, as well as addadditional language capabilities.Woolcock emphasises that the Code –first published in 1975 to cover FX andeuro-currency dealing – has always beenthere to promote fair and orderly markets.“It was interesting to compare the oldversion with the new one against theevents that happened in January when wehad a black swan event,” he said duringhis speech at the General Assembly. “Theold Model Code stood the test of timewell – it covers what market participantsshould have been doing regarding trade

Model Code 2015 Launched at World Congress

ACI BRIEFINGNEWS FROM THE FINANCIAL MARKETS ASSOCIATION

www.acifma.com

Model Code 2015 Launched at World Congress ...................1

ACI Launches ELAC ......................................2

ACI Responds to ESMA Consultation ....3

ACI FMA Responds to the Fair and Effective Markets Review..........5

Overcoming Industry Challenges

Through International Collaboration....7

In conversation with: Eddie Tan and Marshall Bailey...............11

CFP: Spearheading the New Model Code for 2015......................12

BoE Update: New Online Portal for Self-Certification and Continuous Learning .......................14

The Swissie, FEMR and NDF Clearing: It’s All Go for the ACIFXC .........................15

Global FX Committees Unveil Top Level Guidance...................................16

FX Volume Higher......................................17

Q1 2015 VOL 19, ISSUE 115 ISSN 1469-2031

ACI BRIEFING IS PUBLISHED BY:

Contentscontinued on p.2 !

PROFIT&LOSSIN THE CURRENCY & DERIVATIVE MARKETS

ACI Head Office: 8 rue du Mail, F-75002 Paris,

Tel: +33 1 42975115Fax: +33 1 42975116

MARSHALL BAILEY

DAVID WOOLCOCK

2

ACI BRIEFING I NEWS FROM THE FINANCIAL MARKETS ASSOCIATION I Q1 2015 VOL.19, ISSUE 115 I www.acifma.com

cancellations, rebooking of rates, etc. It isall there in black and white.”Currently, the Australian Foreign

Exchange Committee and the ECB’sForeign Exchange Contact Group, alongwith a number of other regional groups,endorse the ACI Model Code. Moreover,

according to Woolcock, the Associationhas recently seen an unprecedentedinterest from central banks, particularlythose from the non-G3/G7 countries.

Model Code. Continued from p.1

In tandem with the release of TheModel Code 2015, ACI – the FinancialMarkets Association has launched anew e-Learning Annual Certification(ELAC) Portal, which is intended tohelp reduce conduct risk for banks andhelp them align their internal processesand training with the wider regulatoryenvironment.

The ELAC Portal aims to facilitate easierteaching and testing of The Model Codeby allowing individuals and theiremployers to learn, test and monitor theirunderstanding. It will also help embed astrong culture of individual accountabilityand reinforce the right messages across alldivisions and staff members.Marshall Bailey, president of ACI FMA,says: “Regulators are rightly stepping upefforts to tackle trader misbehaviour andplace ethics at the heart of their marketreforms. There is a clear and urgent needto reform the culture and conduct of thefinancial services sector, and ACI’s ModelCode and ELAC Portal set the benchmarkfor industry best practice across the fixedincome, currencies and commodities inorder to achieve this.”As well as enabling members to self-certify through an online exam, the ELACPortal is interactive. Members can seekexpert advice by posting questions and

creating new tradingscenarios when dealingwith grey areas of TheModel Code. The CFPwill assess the scenariosand provide feedback, aswell as determinewhether they should beadded to a future updateto the Code.Furthermore, through theELAC Portal memberscan access ACI’s disputeresolution and arbitrationservices, should theseservices be required. Italso provides a searchfunction so members cango straight to the relevantsection, as well as emailor print particularsections instead of the whole Code.“We are making this conduct and tradingeducation available to all institutions andindividuals globally, to match the needs oflocal and international regulators to createa level playing field across markets,”Bailey explains. “The industry must avoidthe opportunity for ethical arbitrage acrosstime zones, so that all traders behaveconsistently ethically, in accordance withestablished and acceptable global industrynorms.

“Our ACI Model Code, long establishedas the global leader in cross-jurisdictionalconduct, has been written with both thesell side and buy side in mind,” he adds.“The new acronym ELAC not only standsfor the e-Learning Annual CertificationPortal, it can also stand for eLearningAnnual Compliance Portal. We areoffering the chance to have constantupdates and annual reminders of yourobligation as professionals to maintain thehighest standards.”

ACI Launches ELAC

Regulation of “Last Look” Practices (p95)• Use of “last look” should be made fully

transparent to customers, to ensure fulldisclosure as to how business will beconducted, whilst ensuring compliancewith applicable market codes and regu-latory rules. Terms and conditionsshould state explicitly that customerswill see “last look” pricing from theliquidity provider.

• Market participants will be aware oftheir general obligations under existingcodes of practice. Accordingly, whilst“last look” has evolved in a way thatfosters narrow spreads, participantsshall take steps to ensure that provisionof “last look” liquidity does not create

a false impression of market levels ordepth. Under no circumstances shouldorders with “last look” be placed forthe purpose of price discovery and withno intention to trade. It should only beused in order to mitigate technologicalanomalies and latencies when showingfirm prices to customers.

• Having been fully apprised of the bene-fits of “last look” pricing to them, cus-tomers should be in a position to decideto trade or not, in line with customer’sown requirements and execution style.Customer preference can vary – somemight prefer as tight a price as possible,accepting a higher rejection ratethrough “last look”, others might prefercertainty of execution at a differentprice. When a platform uses “last look”

pricing from its liquidity providers, thismust be transparent to the customer andthe consequences explained fully to thecustomer.

• Use of electronic algorithms solely toaccept trades that are favourable to thebank and to reject non-favourabledeals, when the criteria for assessingare equal, should be avoided. Use of“last look” as a risk control mechanismis permitted, subject to transparent dis-closure as above.

• Liquidity providers, aggregators andplatforms should keep accurate statis-tics on fill and reject ratios (both byvolume and ticket numbers), alongsideaudit trails showing the rejected priceagainst contemporaneously observedmarket prices.

MARSHALL BAILEY


ACI – The Financial MarketsAssociation continues to be fullyengaged with global regulators.Following its responses to consultationsover FX benchmarking and the Fairand Effective Markets Review, ACIFMA has more recently represented itsmembers as part of the EuropeanSecurities and Markets Authority’s(ESMA) consultation on transparencyrequirements.

Welcoming the opportunity to consultwith ESMA, ACI’s responses apply to theFX derivatives and specific otherderivative asset classes (CFDs, CDS) asaddressed in the MiFID/R - ESMA LEVEL2 Consultation - Addendum ConsultationDocument on TransparencyRequirements.ACI FMA records “common concerns”among its membership, members’organisations and their customers, notingthat while it fundamentally supports thelegislative goals and objectives that theConsultation endeavours to achieve, itproposes caution in that “liquiditystandards and criteria introduced to fulfilthese transparency objectives should notimpact market liquidity through incorrectcategorisation of illiquid instruments asliquid and vice versa”. ACI points out that transparency inFICC markets does not necessarilyequate to liquidity as is the case inequity markets. “Furthermore, liquiditydetermination methodology amongFICC asset classes, sub-asset classes,instruments and currency pairs must, byvirtue of the diverse nature of thosemarket and product characteristics, beguided according to robustoperational/historical market datacollation,” ACI FMA states. It further advocates that ESMA encouragethe involvement of expert practitionerpanels from trade organisations orregulator and central bank practitionerpanels to ensure “a robust outcome”regarding the evaluation of FICCderivative market liquidity under theMiFID 2 regime.ACI further notes the cost of clearingrelated services, even those preparatoryto market participation in instrumentswhich have not yet been approved ormade subject to mandatory clearing, arealready rising, and are expected to risefurther. “Experience in other

jurisdictions and under past regulatorymodification regimes has demonstratedthat two principled considerations mustunderpin every stage of regulatoryreform,” ACI FMA argues, continuingthat these include the sourcing andanalysis of the data upon which policywill be based. The two principles are the cost/riskanalysis of the compliance/avoidancedecision across all categories of marketparticipant, and the potential forregulatory arbitrage.

Categorisation

As part of the consultation, ACI FMAalso expressed its concern that thepotential for incorrect categorisation ofderivative products as “liquid” may haveundesired consequences for financialmarket participants and for Europeanfinancial markets overall. ACI’s specific concerns are the potentialcostly and onerous burden of additionaltransparency and Systemic Internaliser(SI) compliance requirements underMiFIR on the sell-side, which may have adetrimental impact on liquidity and leadto a reluctance to quote, thus causingshortages in particular currencies,securities or instruments and potentiallyincreasing product cost.It is also concerned about an increase insystemic risk to corporate or institutionalportfolios as customers are eitherreluctant to hedge/invest due to increasedcosts, or, with a reduced product offering,are forced to accept less than optimalhedging or investment instruments.ACI FMA notes that the recent increasein FX market volatility illustrates thesystemic risk attendant to under-hedgingby end users. As many smallerinvestment related businesses, such asprivate equity and multi-family offices,are swept into the definition of financialinstitutions, and many end users arecategorised as large non-financialcounterparties based upon the ESMAdata, the cost of cleared hedging willbecome, or appear, greater to them thenthe potential losses from unhedgedalternatives. “The cumulative systemicrisk from such a result is self-evident,”ACI FMA states.ACI FMA advocates “prudence andconsideration” regarding the process forthe introduction of further regulation and

espouses a phased implementationapproach to allow regulators time todiscern the full impact of the on-goingregulatory initiatives.The association is also worried that thedefinition of liquidity as ascribed to eachindividual currency and cross currencypair is “too arbitrary” because the data isderived from trade repositories (TR)gathered over a relatively brief period(March-May 2014) following theintroduction of mandatory trade reportingunder EMIR. It adds that the tenors are based on a veryprotracted snapshot of trade data, whichmay not represent and accommodate anytrading anomalies; and says the data maycontain compression trade data, whichdistorts liquidity thresholds as these arenot price-predictive, market impactingtrades.ACI FMA further notes that during thetime frame used for the Consultation, dueto the absence of any exception reporting,counterparties would not have been ableto perform validation tests either intra- orinter-TR. Further multiple complications to thesample collected include the doublecounting of mirror offset trades underprime brokerage and give uprelationships, ACI FMA observes.Additionally, many counterparties werehindered in their reporting ability by theabsence of, or delay in, Legal EntityIdentifier (LEI) provision; delayedprocessing of applications for multipleLEIs for certain counterparties and theiraffiliates; tardy reactivation of LEIs aftertheir expiration; and some as yetunquantified levels of general non-compliance.“While netting is taken into account forthreshold calculations at the individualcounterparty level, it is unlikely that theabsolute values of aggregate notionalexposures in the ESMA data are robust,especially when the disparity to tradevolumes is noted,” ACI FMA argues.“The importance of high volume largelyretail contracts such as currency spreadbets and CFDs, which areoverwhelmingly traded on an intradaybasis, is likewise of deceptive relevance.” ACI FMA recommends, on the subject ofdata retention, that ESMA extends thecalibration and sampling period to afuture six month period to take into

ACI Responds to ESMA Consultation

continued on p.4 !3

account the changing structure of theindustry, specifically the additional TRsnow live.

FX Specifics

ACI FMA describes the fundamentalnature of the FX market and its use forhedging and commercial reasons beforequestioning some recommendations of theConsultation Paper. It notes that for manyof the cross currency pairs illustrated inthe paper, liquidity can be and is arrivedat by trading the component parts so thatthe volumes in the actual iterative crossesare not representative of the totalprospective liquidity. Zone differences make a sizeabledifference to the criteria, it continues,noting that, for example, whilst theremight be consensus the USDCLP is aliquid currency, that is surely only the casewhen Latin America is open. The datacaptured for the Consultation, however, is,of necessity, European market centric.“Therefore, while the liquidity frameworkmay seek to describe only the liquidity ofthe EU portion and segmentation of thosemarkets, it appears potentially todemonstrate a percentage of the market inthe European time-zone, rather than theliquidity available,” ACI FMA states. The association also points out thataccording to the Bank of InternationalSettlements (BIS) 2013 Triennial CentralBank Survey of FX Turnover, NDFsconstitute only a fifth of the globalforeign exchange market in outrightforwards and a tiny fraction of overallforeign exchange trading. “In fact, NDFvolumes at just $127 billion per day,represent about 2.7% of the $5.3 trilliontotal global FX volumes based on BIS2013 Triennial FX Survey data, withLondon accounting for some $43 billionper day which is about 34% of NDFtrading,” ACI states, adding the UK FXJoint Standing Committee’s (JSC) surveyin 2014 indicated that NDF volumesamounted $55 billion per day versus$1.398 billion per day of deliverableforwards (swaps and outright forwards). ACI further notes that in the introductionon pages 15/16 of the Consultation Paper,the percentage of trades deemed asforwards and swaps in deliverablecurrencies looks much too low against theNDF data. “Also, we see no evidence thatthe analysis has taken data such as thenumber and type of market participants, aswell as the average size of spreads intoconsideration when discerning liquidity,” it

points out. “In comparison, theConsultation Paper data differs radicallyfrom the data illustrated in both the BIS andJSC surveys of 2014 mentioned above.”This means, ACI FMA asserts, that theinference from the ESMA data is that theNDF market is significant in size,whereas it actually representsapproximately 4% of non-spot markets.As such, ACI argues that NDFs, per se, becategorised as illiquid.The association also points out furtheranomalies, “which are of concern” in theConsultation Paper’s data. Theseanomalies are the inclusion of non-deliverable currency crosses within theDeliverable Forward bucket, for exampleCNH/USD, EUR/RUB, INR/USD. It alsonotesd that a large proportion ofinstruments that typically are not deemedliquid (non-USD crosses) in the normalcourse of trading have been categorised as“liquid” by ESMA. “In particular, we note that, under Table48 of draft RTS 9 (FX NDF LiquidClasses), COP-USD pair with a tenorfrom four days to seven days isconsidered ‘liquid’ and the Large-In-Scale(LIS) thresholds are set at a €700million, which is greater than the averagedaily volume for that market,” ACI states.“ACI FMA would propose that some LISthresholds need re-calibrating or re-consideration as they appear unrealistic.”ACI is also concerned at the inclusion ofprecious metals in the analysis,particularly for FX derivatives. It notesthat under Table 48, USD-XAU isincluded as a liquid class of NDF. “TheXAU symbol is representative of Gold,which is not a currency, rather acommodity,” ACI FMA argues.“Therefore, we would suggest thatcontracts relating to precious metalsshould, for good order’s sake and in orderto avoid any duplication of regulatorytreatment, be included in the ESMAassessment of Commodity Derivatives.”Another anomaly is the inclusion ofdeliverable currency crosses within theNDF category, which rarely or never tradeas non-deliverable forwards – thereforecategorising them as illiquid. “Theinclusion of deliverable currency crosseswithin the NDF category offers thepotential for regulatory arbitrage,” ACIFMA says. “Regulatory reform is renderedmoot where market rules can be easilyavoided by the substitution of economicallyidentical unregulated transactions. “Multiple possibilities are demonstratedin the data presented,” it continues.“Some of these are of a ‘plug and play’

nature, such as the substitution of spot ordeliverable forward currency pairtransactions for NDFs. This is a simpleadjustment for the many contracts inunderlying deliverable major currencies,such as AUD/JPY, which counterpartieselect to trade on an NDF basis. “The ESMA data on NDFs reveal that asubstantial percentage of contracts thatare categorised as liquid NDFs fall withinthis category, and the majority of those inthe one to three month maturity range,” itadds. “Not only could NDF clearingrequirements be easily avoided byreliance on the much more liquid existingspot or deliverable forward market forsuch pairs, but the inclusion of thesecontracts in the data introducesconsiderable distortion in the calculationof threshold volumes. This is especially ofconcern because the users of such‘elective‘ NDFs tend to be non-financialcounterparties, who are doing so forhedging purposes.” On a related issue, ACI FMA alsosuggests that, given the BIS surveymeasures FX options turnover at 9% ofthe total market volume (of which,according to market intelligence, FXcomplex exotic options representapproximately 2% of the FX market) allFX options, whether exotic or generic,should be regarded as “illiquid”.

Maturities

ACI FMA also points out that the ESMAdocument uses BIS data for analysing thematurity of instruments, but this does notpaint the most accurate picture. BIS datahighlights that turnover was concentratedfor contracts with a maturity below oneyear, however it points out that theconsultation documentation referencedanalysis of DTCC data (NDF only),which revealed that liquidity wasconcentrated on the shortest maturities.For all currencies except CNY, 90% of thecontracts in the sample had a maturitybelow three months, 98% of the contractsin the sample had a maturity below sixmonths. Using the UK’s JSC October 2014 data,ACI FMA notes the liquidityconcentration is focussed in the one-to-sixmonth bucket, tenors not aggregated bythe BIS which uses “up to seven days” and“under one year” as its two criteria.“Whilst difficult, and subject toconsiderable debate, a more simple criteriaof what is or is not a liquid currency is arecommendation based on market

continued on p.5 !

ESMA. Continued from p.3

4


The concept of the UK’s Fair andEffective Markets Review (FEMR) isunprecedented – it is the first time thata government has consulted with itscentral bank and financial regulator onthe fixed income, currencies andcommodities (FICC) markets.

Although the review was driven bydamaging events such as benchmarkmanipulation including around the WM/R4pm Fix, the financial industry has showna determined effort to put its house inorder. When announcing FEMR in June,UK Chancellor of the Exchequer GeorgeOsborne was clear, “We’re not going towait for more scandals to hit – instead weare going to act now and get ahead,” andthe industry got behind this vision.

FEMR has actively engaged with marketparticipants to determine the best wayforward in rebuilding confidence and trustin the fairness and effectiveness of themarkets. It has sought out responses fromacross the industry to ensure the majorconstituents have a voice. Its aim is toensure that markets are open andtransparent, with improved conduct andbehaviour, but without compromisingmarket efficiency and liquidity. ACI – The Financial MarketsAssociation welcomes the opportunityto be involved in FEMR. It believes thatthrough such engagement with variousmarket participants the regulators,industry participants and the public willbe better educated on the structure anduses of the FICC markets, which in turn

will help to ensure that best practicesare followed.Additionally, it quickly became clear tomost market participants that FEMRwould have a much wider influence thanjust the UK market. Effectively the reviewwas looking at how to deal with a marketthat is essentially wholesale and global innature, and therefore does not fall undernational regulations. Thus, regulatorsaround the world have paid close attentionto the process with the belief that theresponses will also help them shapepolicies and rules. This is illustrated by the recentpublication of an updated common globalpreamble for best practice and marketconduct by eight central bank FX

ACI FMA Responds to the Fair and Effective Markets Review

intelligence from, and discussion with,ACI’s members,” the association states.“We would propose the following for thedetermination of maturity vs liquidity – allmajor currencies against the US dollar andeuro up to one year and all minorcurrencies against the dollar up to sixmonths (with minor Europeans against theeuro also) would appear to encapsulatewhat is trying to be achieved by this CP. “Additionally, the only other definition isthat for minor currencies and/or NDFs thedefinition of liquidity would onlyencompass the times those centres areopen,” ACI FMA continues. “We wouldpropose that notional amount per dayshould be increased significantly fromEUR 500 million to circa EUR 5 billon. “It should be noted that Table 1 on page17 of the CP confirms that the notionalamount per day well exceeds thesuggested EUR 500 million and as suchthere is the potential of categorising someinstruments as liquid, which are actuallynot liquid, ACI FMA observes.“Moreover, as mentioned previously, FXOTC (derivative) trades can be executed(24/6) at any time and are thereby notrestricted to certain trading hours ordays.”

Definitions

With reference to the CP data, ACI FMAnotes that there are significant differencesin Large in Scale (LIS) thresholds

between currency pairs and tenor buckets,which is attributable to the complicationsESMA has experienced in calibrating thedata. For example, as mentionedpreviously, regarding NDFs the COP-USD pair with a tenor from four days toseven days is considered liquid and theLIS thresholds are set at EUR 700million, which is greater than the averagedaily volume for that market. “This is,therefore, obviously erroneous andrequires amendment,” ACI points out.It is also of concern to ACI that the SizeSpecific to Instrument (SSTI) thresholdhas been set at 50% of the LIS thresholdas opposed to any other percentage, whichappears to be quite an arbitrary level. TheSSTI and LIS are different thresholdswith different intended objectives, ACIFMA notes. The SSTI threshold is toprotect liquidity providers and SIs from“undue risk”. ACI believes that it would be moreappropriate if LIS/SSTI thresholds wereset at a level appropriate to the liquidity(or illiquidity) of each instrument andreflect local market conditions, rather thana ‘one size fits all fixed threshold’ withinthe EU. Failure to rectify this couldpotentially impose costly and onerousburdens of additional transparency and SIcompliance requirements under MiFIR onsell-side market participants, which couldthen have a detrimental impact onliquidity and instigate a reluctance toquote. “This could cause shortages inparticular currencies, securities or

instruments or increase product cost forcustomers,” ACI FMA argues.While ACI agrees regarding a minimumdeferral period of 48 hours fortransactions that are equal to or exceedLIS, or transactions equal to or above theSSTI threshold, it proposes that thisshould actually be expressed as T+2(business days) to accommodatetransactions with counterparties at closeof business before the weekend or beforenational holidays to ensure adequate timefor market risk mitigation of large orilliquid transactions on the part of themarket makers. However, with regard to transactions thatare both LIS and illiquid, this timedeferral may not be adequate, it accepts,adding that ACI would urge prudence andcaution and counsel that a longer deferralperiod may be considered. “A further point of consideration, whichACI FMA would advocate and encourage,is that there should be a pan-EU adoptionand harmonisation by National CompetentAuthorities (NCAs) of the supplementalvolume omission deferral regime.”ACI FMA believes that the Consultationdocument, and the responses from thevarious market participants will help theregulators, industry participants and thepublic to be better informed regarding theissues discussed. “The greater awarenessthat comes from this knowledge willassist the industry in assuring that bestpractices are implemented and followed,”it concludes.

continued on p.6 !5


ESMA. Continued from p.4

committees, which were undoubtedlyinfluenced by FEMR.

The Consultation Process

FEMR opened its market consultation on27 October 2014, focusing its questions onthe “most critical sources of vulnerability”and identifying the potential solutions fromboth structural and conduct perspectives.By the 30 January deadline, it hadreceived 67 responses from sell and buyside firms, market infrastructure providersand financial market associations – manywith operations spanning numerousjurisdictions across the globe. ACI FMA openly supports theconsultation, especially the idea that thedebate should take place in a public forum.It specifically welcomes the importancethat the consultation document places onthe behaviour and ethical conduct ofindividual market participants, reflectingthe need for cultural change. However, it advocates in favour of“prudence and consideration” regardingthe introduction of further regulation.“Regulators need to allow the full impactof the ongoing regulatory initiatives andrevisions and the ensuing changes to beabsorbed by the global markets, in orderto evaluate whether further intervention isnecessary to capture hitherto unidentifiedrisks and to prevent the emergence of newsystemic risks and/or the disruption ofexisting, functioning markets andliquidity,” it says in its response. The Association produced its responsepaper, which is available on the ACI FMAwebsite, after considered debate amongst itsleadership bodies and members. Its startingpoint is a firm belief in a coordinatedinternational response and the role that theACI Model Code could play in helping theindustry enhance its integrity and credibility.Fundamentally it believes that for marketsto be “fair and effective”, there must be a“willingness on all sides to engage ineconomic activity without concerns on thepart of either party that the role they areperforming is unduly prejudiced”.Spearheaded by the ACI FX Committee(ACIFXC), ACI FMA provided responses toall 49 questions, with a particular focus onthose questions that are most relevant to theFX asset class, such as last look, stop lossesand the need for a global code of conduct.

Last Look

One area of growing concern in themarket is around the risk associated with

internalisation and last look practices inthe FX market. ACI has maderecommendations for procedures andpractices around the use of last look, andincorporated them in a new entry for therecently launched Model Code 2015 (seepage 1).In its response to the consultationdocument, ACI FMA says that while itdoes not believe internalisation isperceived to create risks, it does warn thatthat it believes last look can “represent arisk to foreign exchange markets if its useis inappropriate and clients are notadequately informed of its application andthe consequences to their trading”.“In particular, it is important thatprovision of last look liquidity does notcreate a false impression of market levelsor depth,” ACI adds. “Under nocircumstances should orders with lastlook be placed for the purpose of pricediscovery and with no intention to trade.”Instead, it believes the practice shouldonly be used in order to mitigatetechnological anomalies and latencieswhen showing firm prices to clients.In addition, ACI FMA calls for last lookpricing from a platform’s liquidityproviders to be made transparent to theclients and to ensure that its application isfair. “Use of electronic algorithms solelyto accept trades that are favourable to thebank and reject non-favourable deals,when the criteria for assessing are equal,should be avoided,” it states.

Electronic Trading and Stop Losses

In its response to FEMR, ACI FMA alsowarns against the “over-reliance” onelectronic trading, and suggests that theimbalance between voice and e-tradinghas diminished the integrity andperformance of the FX market.ACI points to events surrounding theremoval of the 1.20 EUR/CHF floor bythe Swiss National Bank on 15 Januaryas a demonstration of the domination ofe-trading. It says that that the currentFX market microstructure, in anunexpected market environment, can“facilitate a liquidity squeeze/abyss asthere may be no willingness for marketliquidity provision as would havepreviously existed in a voice onlyenvironment”.“Therefore, in this situation, thepredominance of ‘one’ market structure(e-trading) and the demise of traditionalbi-lateral voice trading has diminished thefairness and effectiveness of the FX (spot)market,” it says.

While the Association notes that e-platforms have built efficiency in FXmarkets through the provision of STPtechnology, it also argues that thisdevelopment has reduced price discoveryand trading costs, thus enabling traditionalusers of the FX market to becomeliquidity providers.ACI FMA also comments on stop lossorders, with specific reference toexecution following the Swiss ‘blackswan’ event. These orders areautomatically generated on e-tradingplatforms, matched and confirmed bysettlement systems without the institutionsconcerned necessarily having theopportunity to cover their risk. “We have observed that, due to theunprecedented circumstances, customershave experienced some very differenttreatment at the hands of theirbanks/brokers. This has varied from thebanks/brokers honouring the generatedtrade rates and absorbing the losses versusinstitutions revisiting and proposing toreset the trade rates at the customer’scost,” it says.ACI FMA points to the ACI ModelCode’s clause regarding stop losses on e-platforms, which states: “Additionalattention should be paid where e-tradingplatforms automatically execute stop-lossorders. In accepting these orders, whilstan institution assumes an obligation tomake every reasonable effort to executethe order promptly, there is no guaranteeof fixed price execution to thecounterparty unless otherwise agreed byboth parties in writing.”Traditionally, the Model Code proposesthat dealers should regard themselves asbound to a deal once the price and anyother key commercial terms have beenagreed, a rule which could be applied tothe electronic market. However, the Codealso states that holding voice brokers“unreasonably” to a price is viewed asunprofessional and should be discouragedby management.Consequently, ACI FMA has requestedthat the regulators provide clarity relatingto market behaviour in such instanceswhere the interpretation of clauses in legalcontracts may contradict what would beregarded as best market and customercentric practice.

Global Code of Conduct

In the section surveying market practicestandards, FEMR’s consultation documentcomments on the fact that there are

continued on p.7 !6


FEMR. Continued from p.5

Addressing the ACI World Congress,the head of Italy’s central bank arguedthat in order to strengthen the EU’smonetary union further steps must betaken towards political union, andwarned that such a path would beneither short nor smooth.

In his keynote speech at the joint 54thACI World Congress and 21th Congressof the Assiom Forex (ASFX), IgnazioVisco, Governor of the Bank of Italy,pointed out, “The banking union can be,as originally intended, an important factorof stability for the euro area so long as wesucceed in striking the right balancebetween the need to safeguard thestability of banks and that of enablingthem to support the economy.” His message struck a cord with themajority in the audience who aregrappling with the “new normal” offinancial regulations and the very low – ornegative – interest rates.Each year the Governor of the Bank ofItaly delivers his official speech at the

ASFX Congress, addressing the Italiancommunity of financial market operatorson new market developments, as well aseconomic and monetary policies atnational, European and international level. Visco began his annual address bywelcoming the ACI World Congressdelegates and stressed the importance ofan international forum for exchangingideas, enriching perspectives, buildingtrust across borders and settingbenchmarks for the industry as a whole.“This is especially important in financialand currency markets, which arefundamental infrastructures in oureconomies,” he said. “We live in a difficult period whenfinancial transactions are often consideredwith scepticism if not suspicion.Transparency and trust, the respect ofethical codes and efficiency and bestpractice are essential conditions and mustbe pursued with courage anddetermination.”Giuseppe Attanà, ASFX President, alsohighlighted the importance of

collaborating on an international level toprogress in a challenging marketenvironment. “The world has changedconsiderably and is continuing to change,but it isn’t difficult to manage suchcomplex change and adapt to newsituations,” he told delegates. “This is truefor our associations in the bankingindustry, which need to react to ongoingrationalisation processes, new regulationsand also the changing needs and desiresof customers. “Financial market associations arenumerous in the international arena; eachhas its history and specific characteristicsthat add value to what they do. It is alsotrue that continuing to undertake ouractivities as we did in the past withoutfactoring in changes and innovationwould not be to the benefit of ourmembers. There is a strong need to lookfor new synergies among existingassociations at the international level.This could enhance efficiency on theorganisational side and also add value to


already numerous codes in FICC markets,reflecting the evolution of financialinstruments and markets in different legaljurisdictions. It remarks, “The existenceof multiple codes arguably limits theircollective effectiveness, but reflects thedesire of individual jurisdictions andmarkets to retain control over their owndomain. “The ACI Model Code, for example, hasglobal coverage, but is not universallyadopted. And there are many nationalcodes covering FX markets – althoughglobal FX committees are currentlyworking to introduce a common globalpreamble to those codes. In principle,market participants see merit indeveloping a single, global approachacross a number of FICC markets,commanding broad-based industrysupport.”ACI FMA agrees that the ultimate aimshould be for one global code of conductto address ethical and behavioural issues.It consistently argues in its consultationresponse that The Model Code should beadopted formally by the industry on boththe buy side and sell side, and appliedacross the world.

“We see the provision of a global code ofconduct, such as the ACI Model Code, asessential going forward,” it says. “Single-platform (company) and national/regionalcodes may sit alongside a global code, butthere should be few (if any) differences inthe application of these codes on marketpractice. “Any differences increase the risk ofethical arbitrage amongst marketparticipants, and give rise to the issuesabout which the consultation documentwas written.”Moreover, ACI supports professionalqualifications for individuals operating inFICC markets, and already provides acomprehensive suite of examinationsincluding a standalone exam on TheModel Code.“Education is key to the effectiveness ofany code of conduct, and this must beapproachable and delivered in a user-friendly manner (Web-based forexample), and must be global in nature,”it adds. “It is essential this is backed up byself-certification and auditable completionof the attendant education required forparticipants to be current.”The Association recently launched its e-Learning Annual Certification (ELAC)

Portal (see story, page 2), which isinteractive and lets industry participantssubmit scenarios, which may fall into“grey areas” of the Code, to theCommittee for Professionalism for furtherguidance. In this way, The Model Code will remaincurrent through continual reassessmentand periodic updates.If official endorsement was forthcoming,ACI FMA says it will be happy for aglobal regulatory body to function as asupervisory board in the production ofThe Model Code. “A single codeendorsed by both the industry and thesupervisors would make The Model Codesustainable and with ‘teeth’,” it adds.In addition to these three “hot topics”,ACI also provides in-depth responses toquestions relating to benchmarks,conflicts of interest and use ofconfidential information, surveillance andpenalties, and self-regulation. FEMR plans to make its finalrecommendations in June 2015.

The full text can be downloaded from theACI FMA website –http://acifma.com/news/fair-effective-markets-review-consultation-paper-aci.

Overcoming Industry Challenges Through International Collaboration

FEMR. Continued from p.6

continued on p.8 !7

the strengths and specificities of eachassociation. We believe that this is a movethat should be undertaken in order toensure the future of associations, whichmuch continue to create value for theirmembers and the market.”

Rebuilding Trust

More than 1700 attendees and 50exhibitors attended the event from 3-7February in Milan, Italy.Following three days of internal Council, Committee and Board meetings, delegatesparticipated in a full day of workshopsand panel discussions at the Congress. Claudia Segre, General Secretary ofASFX, began the day by underscoring theneed for rebuilding trust in the financialindustry, which she called “the biggestcasualty” of the global financial crisis. “There are specific trust and ethical issuesin the industry’s culture that we need toconfront,” she said. “First, finance isbecoming more de-personalised and long-term, sustainable relationships withcustomers are not given properimportance. Second, compensationstructures tend to emphasise profits asperformance measures, with adisproportionate focus on sales targets,which are often associated with too muchrisk taking or scant regard for clientinterest. Third, and more fundamentally,

departures from ethical conduct are tooeasy accepted as the norm. “The reform of the financial industry willnot be complete until this issue of trustand ethics is addressed. This involvesgetting the culture right,” she added.To do this the industry needs to build anecosystem, she argued, in which theassociations have an important role toplay. “We need to work closely with theinternational community to ensure thatfinancial institutions foster some riskculture, but also conduct themselves in aprudent and socially responsible manner.” Manfred Wiebogen, Honorary Presidentof ACI International, added, “Althoughwe have seen some misbehaviour in themarketplace, our members have stuck tothe ACI Model Code. And during theworst of the crisis, our well-educatedpeople have helped the industry survivethis crisis. We should be proud of that.”

Who Will Win the Currency Wars?

In the first panel discussion entitled“Currency Wars, No More!”, chaired byLorenzo Frontini, Head of CorporateFinance and Markets Italy, DeutscheBank, two currency experts debated thestate of the global economy, includingcompetitive devaluation, the carry tradeand deflationary issues. Gregorio De Felice, Head of Researchand Chief Economist at Intesa Sanpaolo,started off by challenging the panel’s title,saying that “no more” was wishful

thinking as currency devaluation is aneasy way to defend competitiveness. Hepointed to the waves of quantitativeeasing in the US, Japan and now Europe,albeit with key difference between theprogrammes. “[The] most important effect [of EuropeanCentral Bank’s QE programme] is eurodepreciation,” said De Felice. “We havealready seen a 20% depreciation of theeuro against the dollar.” However with a strong dollar and theFederal Reserve likely hiking rates in thesummer or fall this year, he believed thatthere isn’t much room for furtherdepreciation of the euro, and forecastedthe exchange rate to stay around 1.10 forthe coming months. Frontini agreed withthe 1.10 target. Ian Jenkins, CFA, Senior PortfolioManager Global Fixed Income andCurrencies at UBI Pramerica, said that thereason for currency wars is the need forgrowth; countries try to steal growth from

continued on p.9 !8


CURRENCY WAR PANEL

CLAUDIA SEGRE

GREGORIO DE FELICE

IAN JENKINS

LORENZOFRONTINI

MANFRED WIEBOGEN

ACI World Congress. Continued from p.7

9


each other through competitivedevaluation.“Although currency devaluation seems tobe an easy way to generate growth, thereare downside effects such as an increasein volatility,” he explained. “This tends tooffset the positive effects of countriestrying to gain competitive advantage viadevaluation because an increase involatility is a drag on global trade, it

raises the cost of hedging and limitscapital flows to countries in greater need.”Central banks across the world havelowered interest rates – some intonegative territory – as their balance sheetshave ballooned. “The tail risk that comesout of such dynamics is dramatic andunprecedented in historical terms. What isgoing to happen to the losers of this latestround of currency wars against the dollar,which has been appreciating against theeuro and other currencies?” He also mentioned the Chinese yuan(CNY), which is pegged to the dollar andhas appreciated as well.“It seems that disinflation/inflation iswhat it is all about,” he said. “Despite theamazing expansion of QE from centralbanks, the inflation problem is still aliveand kicking. On a broader macroprospective, we are still not out of whatsome call a balance sheet recession,whereby the private sector isdeleveraging. As previously said,

currency devaluation risks becoming alose-lose situation.” De Felice shared the view that negativeyields are not a positive feature inEurozone. “Negative yields in Germany isquite unpleasant especially for theBundesbank, which has to buy bonds withnegative yields so will have losses. “What can a central bank do in order tofight a deflation risk? I think that a hugeliquidity injection into the system can beone move but agree that if this is the onlymove to fight deflation risk then we arerunning many risks. Monetary policyalone can’t lift economic growth.”Not far from anyone’s mind following therecent election of Syriza in Greece is thepossibility of a “Grexit”. According toJenkins, the economics and sustainabilityof the Greek debt has been exposed asbeing unsustainable. “However, my guessis that they will achieve a way ofextending the duration of Greece’s debt

LIQUIDITY MANAGEMENT ALM PANEL

GIOVANNI SABATINI

MATTEO BOSCO

OLGAY BUYUKKAYALI

RICHARD MIRATSKY

PIOTR CHWIEJCZAK

ILAN JAFFE

EM VS DM PANEL


continued on p.10 !

without really calling it a restructure,” hepredicted. “Under the theme of currency wars, wehave to talk about the drachma,” said DeFelice. “Currently, it is a poker gamebetween [Alexis] Tsipras and hiscounterparts. If they go for a Grexit, thenthe Greek government needs to blockcapital outflows and nationalise the banks.Overall, Greece has more to lose thangain in leaving the Eurozone.”Both agreed that the euro will survive thiscrisis, with De Felice saying that it wouldsurvive even better without Greece.

Grappling With the ‘New Normal’

Many of the hot topics covered in the firstpanel were revisited in the followingdebates, including: low to negative interestrates, slow economic growth, unintendedconsequences of QE and new regulations,inflation/deflation issues and EM risk. The next workshop focused on liquiditymanagement and asset liabilitymanagement (ALM) in a low interest rateenvironment. The regulatory framework iskey in shaping the banking businessmodel and market dynamics as well. Ilan Jaffè, Co-Chair of the ALM ASFXCommittee, moderated the panel and wasjoined by Giovanni Sabatini, DirectorGeneral, ABI, and Pierfrancesco Zeppieri,Head of Treasury Department Italy atDeutsche Bank.The workshop discussed how the new

environment is affecting funds transferpricing, new volatility, reduced carrytrade, credit dispersement, net interestmargin and repo markets. Jaffè thought that liquidity coverage ratio(LCR) was a key aspect, but questionedwhether there are enough assets in theEurozone to meet LCR, which could putEurope at a disadvantage with regards tothe US. Part of the problem lies with theuncertainty around the rules for LCR, saidSabatini, adding that liquidity isn’tflowing to the real economy because ofthis uncertainty. “We need clear, stablerules, transparently applied and possiblynot with procyclical effect. But we need toassess today whether all these conditionsare met. I am afraid not. This will impacton the future strategy of banks.”The third session of the day had twoconcurrent panels. One was entitled“Emerging Markets Versus DevelopedMarkets: A New World Equilibrium”. Thepanel included Richard Miratsky, Head ofthe Corporates Analytical Team at DagongEurope; Matteo Bosco, Head of BusinessDevelopment for Switzerland and Italy atAberdeen Asset Management; OlgayBuyukkayali, Head of EEMEA ResearchNomura International; and Piotr Chwiejczak,CEEMEA Strategist BNP Paribas. The panel looked at China’s increasinginfluence on the global macroeconomicstage and how it continues to be seen as thegrowth engine of the world, despite thefact its growth is slowing down. Bosco, for

one, didn’t believe the Chinese economywas heading towards a “hard landing”, butalso pointed to India’s potential to take bigsteps in the next decade. It also looked at how the sharp drop incommodity prices has had far-reachingimplications for growth, inflation,monetary and fiscal policy across the EMworld. Buyukkayali was bullish on thePLN and ZAR, while Chwiejczak voicedhis concerns over the TRY and RUB. The second panel in that session exploredthe developing global regulatoryframework, covering new directives suchas European Market InfrastructureRegulation (EMIR); Dodd Frank; BankRecovery and Resolution Directive(BRRD); Markets in Financial InstrumentsDirective II (MiFID II); and Committee onPayments and Market Infrastructures(CPMI), to name but a few.The panel was moderated by Godfried DeVidts, Director of European Affairs atICAP, and included Stefano Bellani,

continued on p.11 !10


FIXED INCOME VS EQUITIES PANEL

ARMANDO CARCATERRA

BRUNO ROVELLI

GABRIELE SACERDOTE

FELIPPO CASAGRANDE

PHILIPPE RAKOTOVAO


ACI Briefing caught up with EddieTan, Chairman, and Marshall Bailey,President, on the sidelines of the ACI54th World Congress GeneralAssembly in Milan, Italy. Reflecting onthe year just gone, they touch on thechallenges and opportunities for ACI –The Financial Markets Associationand then speculate on what the next 12months might hold.

No one can deny it has been a tough yearfor global markets in general, rangingfrom the impact of political uncertainties,such as the Hong Kong street protests andthe Ukraine conflict, to economic worries,such as the low interest rate environmentand ‘Grexit’, which continues to doggedlyhang over the Eurozone. In addition, regulatory pressures havecontinued to intensify and, as a result,regulatory costs have risen. Banks arenow taking a long hard look at theirbalance sheets and taking steps torationalise them. This has begun to impactthe trading community, which has beenused to larger balance sheets. Thiscontraction will likely continue into 2015,as the banks get closer to implementingcapital requirements under Basel III. But despite a challenging year grappling

with a number of unprecedented events,none more so than the Swiss NationalBank’s removal of the EURCHF floor thatcreated pronounced volatility in mid-January, ACI FMA Global ChairmanEddie Tan is full of optimism regardingthe role that the industry association hasplayed and will continue to play in thefuture. “We have put together a solid roadmapoutlining where we believe ACI should beheading,” he says. “We want to ensurethat ACI FMA continues to be seen as aleading professional body that isencouraging market participants to adhereto standards of conduct and best practice.I am very encouraged by what we haveaccomplished this past year.”Tan, who was appointed Global Chairman

in 2013 and also serves as ACI’s Asia-Pacific President, believes that a narrowwindow of opportunity has opened upwithin which regulators are reaching outto market participants and industryassociations in order to understand how tohave greater oversight over an industrythat has always been relatively self-regulated – but without over-regulatingand stifling it. He points to the recent Bank of England’sFair and Effective Markets Review, inwhich the ACI FMA actively engaged,including the submission of a reponse (seepage 5).“Regulators are searching for balance,” heexplains. “They do like some form of self-regulation, but they also want to have



Managing Director, Head of the EMEA,APAC & Emerging Markets FinancingDesks at JP Morgan Securities; MarcoCastagna, Money Market ASFXCommittee; Eduard Cia, Head of TreasuryUniCredit Bank; and Piergiorgio Valente,Chairman Fiscal Committee ofConfederation Fiscale Europeenne.The final panel of the day, entitled “FixedIncome Versus Equity: Scenarios andImpact on Portfolio Allocations 2015-2016”, looked at how different rounds ofcentral bank QE has offered some comfortfirst to bonds and then equities, but notedthe risk factors that still exist willchallenge the growth and stability of thefinancial markets. Panel participants included ArmandoCalcaterra, Head of Investments atAnima; Filippo Casagrande, Head ofInvestments at Generali Investments;Philippe Rakotovao, Global Head of Salesat CA-CIB; and Bruno Rovelli, Head ofInvestments, BlackRock. GabrieleSacerdote, Co-Chair of the Capital MarketASFX Committee, chaired the session.

Boldly, Casagrande said that the “juice inthe bond market has been squeezed”. He believed that the market is pricing inlow inflation “forever”. Calcaterra, on theother hand, said that QE is working butinflation is a worry. While the hugeamount of US debt held outside the USmay cause the dollar to fall, he notedthere is still space for dollar to appreciate. Rovelli argued there could be positivesurprises from the Eurozone in the next12 to 18 months, including higher growththan the US. However, the cyclical storyin EMs is much less convincing. The following day Roberto Napoletano,Editor-in-Chief, Il Sole 24 Ore, Radiocorand Radio 24, hosted a roundtable called“The Banking System and the CorporateSector” to take stock of the situation inItaly since the crisis and posed thequestion of where and how they couldturn things around. The roundtableincluded Guido Grassi Damiani, Presidentand CEO of jewellery company Damiani,and Andrea Pontremoli, CEO and GeneralManager of Dallara Automobili from thecorporate side, as well as Federico

Ghizzoni, CEO Unicredit, and FlavioValeri, Chief Country Officer at DeutscheBank, from the banking side. Ex-IBM executive Pontremoli’s answerwas to invest in smaller and innovativeItalian companies. Every year the racingcar manufacturer invests 20% of itsrevenues into an innovator. He called onthe banks to come up with tools to helpgrow his business – not just tools they arealready selling.Damiani also called on the banks tosupport smaller firms, as they could onlygrow and thrive with support from thebanking industry. “The banks did supportus when we were small, and we paid backevery penny of the loans,” he said,adding, “The companies that havesurvived the crisis have a competitiveedge – they are stronger for it.”

AC World Congress 2016The next ACI World Congress is to beheld in Jakarta, Indonesia from 26-30April, 2016.

In conversation with: Eddie Tan and Marshall Bailey

EDDIE TAN MARSHALL BAILEY


The ACI Committee forProfessionalism’s (CFP) majorproject over the past year has been toupdate the ACI Model Code for 2015,which it launched at this year’s ACIWorld Congress in Milan, Italy.

Although the Code was last revampedin 2013, recent events spurred on theCFP to revisit it again. The Committeehas developed new content addressingprime brokerage, with recommendedprocedures when there are disputes in aPB trade. In addition, the CFP includednew content on the controversial aspectof “last look”. “We consulted widely with the industryto ascertain current views on last look,as well as taking into account the

regulators’ views, and then added ourrecommendations for last look into theModel Code,” explains DavidWoolcock, Chair of the CFP.The CFP also added sections on highfrequency and algorithmic trading, inlight of the changing regulatory picture.The Model Code is now available as aWeb-enabled downloadable documentfrom the ACI FMA website. “We areslightly changing how the Model Codeis accessed because, with the speed ofevents happening at the moment, wewill probably have to deliver moreupdates to the Model Code than in ourregular schedule,” says Woolcock. Members will have to enter their emaildetails in order to download the Code,



enough oversight to ensure what hashappened in the past won’t happen again.”

Beacon of Best Practice

ACI President Marshall Bailey, who wasappointed as the Association’s first full-time President 10 months previously atthe World Congress in Berlin, Germany,agrees with Tan’s assessment of the rolethat ACI FMA can play in the currentturbulent market environment. “For a longtime we have been a beacon for bestpractice and ethical conduct. We havebeen able to take advantage of our 65-year history and deliver back to theindustry what is effectively the industry’sown answers to best practices,” he says.Importantly, ACI FMA now provides itsmembers with an online, annuallyrenewable, self-certification tool. “That isexactly what many of the industry bodiesare calling for,” says Bailey. “Theregulators are discussing how to implementbest practice, and many institutions arenow looking to ensure that their staff haveaccess to the ACI Model Code.”The fact that the 54th Congress votedoverwhelmingly in support of the newstrategy for ACI FMA is of particularsignificance for Bailey. He praises theenthusiasm and commitment of theorganisation as a whole. “We have hadtremendous internal open and robustdebate around what we will deliver andhow we will deliver it,” he explains.“With a robust and unified approachnot only will our membership benefit

and grow, but the industry overall willbenefit.”The engagement the Association has onevery level is having a knock-on effectacross the industry, and global regulatorsare now paying greater attention to ACI’sopinion and feedback. Fundamentally, Bailey believes that hissuccess as President will be measured bythe “prominence, relevance and inclusionof ACI’s voice within the global financialindustry”. He stresses that the main task in thecoming year is to grow the organisation,building on the advances already made todate – ACI FMA has 13,000 members in60 countries, with the launch of ACIAmerica late last year adding 80 newmembers. “As our membership increases,we will be able to offer our membershipmore, which will result in a virtuousupward cycle,” he says.

Challenges on the Horizon

Looking out into 2015 and 2016, thebiggest challenge for financial markets ishow to risk manage a world that doesn’thave precedents, according to Tan. “There seems to be a convergence of anumber of risks: political risk is on the up,economic risk is growing, etc. In additionsocial risk is increasing, such as highunemployment among highly educatedyouth, which isn’t being discussed butcould potentially have a significantknock-on effect in the financial markets.Unfortunately, we do not see political willon a global scale to address this emerging

risk,” he says. Bailey, while agreeing with Tan’s appraisalof prominent risks, believes that financialmarkets’ biggest challenge – andopportunity – is the restoration of trust.“Within the restoration of trust is theability for people in financial markets toget on with assisting the economy,” hesays. “The markets work, but sometimesthey get it wrong. Individual actions arenormally entirely worthy andcommercially motivated, but sometimesindividuals get it wrong. Within that settingthere is a cry for trust and transparency,ethical conduct and culture change.“Our opportunity at ACI FMA is tofacilitate that culture change andrestoration of trust,” he adds. “I believethat we are going about that with urgencyand in the best way we know how, whichis to provide education as an alternative toregulation. And we are working in tandemwith regulators to allow them to fulfiltheir mandate in a way that is appropriateand helpful.”Both Tan and Bailey are looking forwardto the 55th Congress, to be held inJakarta, Indonesia from 26-30 April,2016. Bailey concludes, “By then we willhave had a year to execute on what wehave articulated today and can showcasewhat we have accomplished. Plus it is agreat opportunity to interact with ourAsian members and to turn towardswhat is clearly a growth engine for theworld economy, not just China but themany countries where there are activeACI members.”

CFP: Spearheading the New Model Code for 2015

DAVID WOOLCOCK

In conversation with. Continued from p.11

13


and they will be contacted as and whenthe Code is updated.

Joint Committee Meeting

At the 54th World Congress, the CFPand the ACI Foreign ExchangeCommittee (ACIFXC) held a jointmeeting which discussed, among otherthings, what The Model Code should besaying about stop losses and off-markettrades, which were impacted when theSwiss National Bank removed theEURCHF peg in mid-January. Woolcock says, “The conclusion wasthat our content is still very relevantand a good guide to the market,particularly around what can be donewith trades, etc. We wanted to reaffirmour stance regarding trades transactedin very volatile times, where there canbe disputes as to what the big figureis.”The Model Code’s position is that if thetwo parties can’t agree what the rateshould be, then they should take therate that was agreed at the time – aslong as the rate was within the knownmarket at the time. “It is our belief that,unless the two parties bilaterally agreein a fair and orderly manner to adjustrates, any deals that are struck shouldstand,” he explains.Indeed The Model Code clearly states:“If high volatility at the time of thetrade was such that there wasreasonable doubt as to the correct bigfigure documented by authentic marketrecords, then the rate agreed at the timeof the trade should prevail as long as itwas within the authenticated widermarket spread at the time of the deal.” Woolcock continues: “One area ofconcern, and where the CFP isconsidering adding more detail to TheModel Code, is that if there is a disputeover a trade in a highly volatile market,then it is beholden on the liquidityproviders to behave in a responsiblemanner and not bully smaller banksinto accepting rates by threateningwithdrawal of liquidity from that entity.We, at ACI FMA, must condemn thisbehaviour.”

Towards a Dynamic and Interactive Code

Looking ahead, with the launch of thenew interactive e-Learning AnnualCertification (ELAC) Portal (see page2), Woolcock believes the CFP is going

to be quite busy responding to the newscenarios submitted by members.“When scenarios are submitted, wedetermine where our expertise lies forthat particular subject, identify the partof The Model Code that it refers to andthen we prepare a response.”In addition, the CFP offers anarbitration service, as an alternative toresolving disputes in the law courts, aswell as providing advice onprofessional disagreements that mayarise in trading.Together with ACI’s Board ofEducation’s programme of exams andcertification, the CFP plans to keep TheModel Code up to date and make it amore dynamic code of conduct. The results of the Bank of England’sFair and Effective Markets Review(FEMR) may trigger the firstamendments for the Code goingforward, according to Woolcock, whoadds, “But we still believe that TheModel Code has stood the test of time.It has a great history and is the onlyglobal code. We encourage the industryto settle on one code of conduct, so thatjurisdictional arbitrage doesn’t happenin foreign exchange.” Continuing the theme, Woolcockbelieves the biggest challenge facingthe industry is getting participants tosettle on one standard and, to that end,encourages central banks, other FXcommittees and regulators to havegreater input into the Code.

Addressing the Whole Market

Over the course of 2015, the CFP willalso be adding more detailed guidancefor other asset classes, particularlyfixed income and asset liabilitymanagement (ALM). As an ongoing

project, the CFP is looking at creating aCode that is suitable for non-bankfinancial institutions, particularlywealth and asset management firms, aswell as for corporates. “We want to develop a Codespecifically for the buy side thataddresses more of their detailedsituation because, for example, what wesay about rate fixing is mainly gearedto bank behaviour,” explains Woolcock.“As we have always maintained sincethe allegations first came out, it appearsthat there may have been areas wherethe buy side could have done better.Plus, if there is to be more thoroughoversight of the fixing process, then ithas to involve all regulated and non-regulated participants who are tradingaround the Fix.” To help progress its work, the CFP hasadded two new members: RolandStuder, Head of Money Markets atCredit Suisse, and Jørn (Luffe)Sodborg, Head of e-FX Sales and PriceDistribution at Jyske Bank.In his speech at the ACI WorldCongress General Assembly, ACIPresident Marshall Bailey commendedthe CFP’s hard work. “David Woolcockand his team on the CFP have held thelight high, and have shown that we, as adiverse association of volunteers, canteach the financial community aboutbest ethical practices, and that manybankers are focused on ethical conduct.While so many large players seem tohave forgotten that ethical conduct andtrust are the most important aspects oftrading, the ‘our word is our bond’mantra that underpins the markets, ourACI CFP has held the answers. Andnow, as the world seeks answers tothese challenges, we as ACI canprovide them.”

ACI Model Code 2015 – Dealing at Non-CurrentRates and Rollovers (p36)• Where disputes arise in foreign ex-

change quotations, it is highly unethi-cal for one party to hold another to anerroneously agreed rate where the quo-tation is demonstrably and verifiablyincorrect and away from the prevailingmarket rate.

• If high volatility at the time of thetrade was such that there was reason-able doubt as to the correct big figuredocumented by authentic market

records, then the rate agreed at thetime of the trade should prevail as longas it was within the authenticatedwider market spread at the time of thedeal.

• If high volatility in an automated envi-ronment takes place momentarily, andis clearly a technical arbitrage and nota genuine indication of where the mar-ket might be, the trade should be can-celled.

• Where, during prolonged high volatil-ity, the price continues within the samerange, this would not be considered offmarket but indicative of a new marketlevel.

CFP. Continued from p.12

14


The Board of Education (BoE), acornerstone of the ACI – The FinancialMarkets Association, has spearheadeda number of improvements during thepast 12 months, especially the launch ofan interactive e-learning portal.

Its main goal is to ensure that marketparticipants are fairly represented and putin a stronger position from an ethicalstandpoint, and it does that through theACI Model Code – “the bible of ethicalbehaviour”.Currently, the Association offers a suite ofcourses and exams, including the ACIDealing Certificate, ACI OperationsCertificate, ACI Model Code Certificateand ACI Diploma. This year, the Boardfocused on developing the ACI Diploma,which will become the ultimatequalification, by separating it into variousmodules that can be implemented at anybank. In addition, the Board decided toinclude other product sets, particularly inthe fixed income space.Marshall Bailey, President of ACI FMA,praised the work the Board has achievedin his speech at the ACI Congress GeneralAssembly. “Just look at the growth of theeducational offering of ACI – we now notonly have the ACI Dealing Certificate, socoveted around the world, and theOperations Managers Certificate, but awhole series of modules leading to theACI Diploma.“While we believe in further education,not further regulation, we stand ready andable to provide exactly the training sodemanded across the FICC markets,” headded. Importantly, the education programmeincorporates Bailey’s vision of self-

certification and continuous learning forparticipants in the wholesale financialmarkets. “We at ACI can bring all of ourstrengths together in one simple packageby providing self-certification for theindustry. We can assemble our minds, wecan teach our collective skills, and we cancertify through our education that we aretransferring the best possible practices toour members,” he said.To that end, ACI FMA has launched anonline learning portal, AnnualCertification (ELAC) Portal, whichfacilitates easier teaching and testing ofThe Model Code. This allows individualsand their employers to learn, test andmonitor their understanding – effectivelydemonstrating constant compliance on anannual basis.The portal is also interactive,incorporating a scenario builder as well asthe ability to ask the Committee forProfessionalism (CFP) specific questionsnot found in the Code.

Expanding ACI’s Global ReachThrough Education

Importantly for Brigid Taylor, ACI AfricaPresident, the Board of Education hasbeen actively reaching out to new regionsbeyond the Association’s historicalEuropean base and increasingmembership numbers. “Some of thebiggest numbers in terms of educationhave come out of Africa, and that speaksto the fact there are a lot more youngerpeople coming into the market and moredevelopment in the African bankingsector,” she says.According to Taylor, The Model Code’sstrength is its objectivity – it isn’trepresentative of a specific institution or anational sovereign, but a global marketview.“Whether the traders are based in Zambiaor Germany, they are speaking the samelanguage,” she explains. “Theyunderstand how to play the game, theparameters of the field and the rules, sowhat they can and can’t do. It is so mucheasier when you have a rulebook, whichalso helps you to be consistent.”

Changing of the Guard

After six years at the helm, Claudia Segrehas stepped down as Chair of the Board of

Education. During her tenure, shemanaged to reshape the Board to the newdemands of today, expanding into newareas such as asset liability management(ALM), Islamic banking and other marketmatters.Segre, who is also the Italian chapter’sGeneral Secretary, stressed the role theAssociation’s education programme playsin the industry during her openingremarks at the Assiom Forex 2015. “Weare here to promote a culture of ethics infinancial education,” she said. “Theindustry must take collectiveresponsibility to promote higher ethicalstandards. I believe that it is better that theindustry develops a code of conduct andhold firms accountable to their peers.”Speaking at the World Congress GeneralAssembly, Bailey and Eddie Tan,Chairman of ACI FMA, thanked Segre forher contribution. Bailey said, “I especially want to thankClaudia Segre for her role as Chair of theBoard of Education. While she is steppingdown as Chair, a new leader will replaceher and carry on this extremely importantrole as we build it out even further. Thereis so much potential for this area to grow,and we must capture it with urgency. Toall of you who make it possible to spreadour ACI education globally, I salute you.”Tan added: “I see education as a bigopportunity for us and the Board ofEducation has done a lot of quality work.Now we need to make it productive andfruitful for our members, as well asleverage the intellectual property that wehave.”

BoE Update: New Online Portal for Self-Certification and Continuous Learning

BRIGID TAYLOR

CLAUDIA SEGRE

15


The past year has been an incrediblybusy one for the ACI Foreign ExchangeCommittee, as it responded toregulatory consultations and marketevents.

Top of mind for Stéphane Malrait, whohas been Chair of the ACIFXC since itsinception in 2010, were the events of 15January when the Swiss National Bankpulled the plug on the 1.20 EURCHFfloor. The ACIFXC noticed that the spreadwidened significantly after the event; andalthough it has slowly come back tonormal, it remains slightly wider thanbefore. In addition, some client typesfound it more difficult to access liquidity,due to a variety of reasons, not least theirprofile and risk appetite.During a joint meeting with the ACICommittee for Professionalism (CFP) atthe ACI World Congress in Milan, Italy,ACIFXC committee members shared theirobservations of different marketparticipants’ behaviour and discussedwhether their actions were in line withThe Model Code. “There were strong opinions that weshould use The Model Code to make surethat people are aware of best practices,which can be very helpful in thoseextreme conditions,” says Malrait. He points to ACI’s arbitration mechanism,which members can use in situations thatrequire mediation. Although the facility

comes under the CFP’s remit, if it is anFX issue then the CFP will turn to theACIFXC for expert help.

Market Consultations

The two committees also discussed ACI’sengagement with recent regulatoryconsultations. ACI FMA regards the Bankof England’s Fair and Effective MarketsReview (see page 5) as extremelyimportant to respond to, even though itwasn’t FX specific, because it surveyedmarket participants on codes of conduct.

In addition, it is widelybelieved that theoutcomes from FEMRwill have a wider scopeof influence than just theUK. “That is why it wasso important for us tospend the time and effortto reply, and our reply ispublicly available on theBoard of Educationwebsite,” explainsMalrait.In addition to FEMR,ACI FMA responded tothe European Securitiesand Markets Authority’s Octoberconsultation paper on the definition ofnon-deliverable forward (NDF clearing)under European Markets InfrastructureRegulation (EMIR). On the day the twocommittees met together at the WorldCongress (4 February), ESMA announcedit was dropping mandatory clearing ofNDFs. “We are extremely pleased with thisannouncement because thatrecommendation was in our consultationpaper response,” says Malrait. “In ouropinion, the industry isn’t ready forclearing of NDFs in Europe because thereis a risk of regulatory arbitrage betweenAsia, Europe and the US.”He highlights the mismatch betweenregions, for example, if a firm startsclearing in the US, then it could make

available to trade (MAT) executionquickly after that. “However, becauseMiFID II won’t be implemented untilJanuary 2017, if a clearing requirement isput in now in Europe, then electronicexecution won’t happen before 2017,” heexplains.Another topic that garnered a lot ofdiscussion was the imminent change ofWM/Reuters methodology forestablishing its benchmark FX fixes,which widened the execution windowfrom one to five minutes on 15 February.“This is an important change in the

industry,” says Malrait. “We discussed how the market wouldadapt to the change and the behaviour oftrading activity in those five minutes. Ifall fixings arrive within those fiveminutes, then we may see a large increasein volume during those five minutes –something we didn’t see in the past. Wedecided to be vigilant and careful goingforward about what happens during thosefive minutes.”

Buy and Sell Side Working Together

With the ACIFXC is now entering fifthyear, Malrait is pleased with its progressin creating a group of trusted individualsfrom the buy and sell side, as well as FXtechnology platforms, to represent theindustry as a whole. Recently, thecommittee added a specialist inalgorithmic trading to bring in expertisefrom that area. The ACIFXC also provided its expertinsight into reviewing the officialdefinition of last look and what should beincluded in the updated ACI Model Code.“What we didn’t realise when we startedthe ACIFXC is the amount of change inthe FX industry that was going to takeplace due to regulation and the globalinvestigation into market manipulation. Ithink it proves the importance of such acommittee for ACI FMA. “Having experts from the buy and sellside in a room behind closed doors whoare able to discuss sensitive subjects andexpress their own individual opinion isvery valuable for the industry because it ishow we can drive improvements goingforward and recommend best practices,”he explains.

The Swissie, FEMR and NDF Clearing: It’s All Go for the ACIFXC

STEPHANE MALRAIT

“Having experts from the buy and sell side in a roombehind closed doors who are able to discuss sensitivesubjects and express their own individual opinion is veryvaluable for the industry”

The global FX market committees havereleased new top level guidancefollowing a meeting in Tokyo whichagreed the additional guidance aroundkey topics such as sharing marketcolour and use of trading jargon. Theguidelines are intended to sit on top ofthe existing global codes, includingACI’s Model Code.

“ACI – The Financial MarketsAssociation welcomes the announcementfrom eight international FX Committeesthat they have adopted the same set ofrules and principles for their respectiveregions,” says ACI President MarshallBailey. “Harmonised reform andstrengthening oversight of the FXindustry is crucial if we are to restore thereputation of the market, and ACI haslong argued for the need for a set of rulesthat apply globally in order to achievethis. The revised Global Preamble is amajor step towards achieving this goal.“Importantly for market participants andmembers of ACI FMA, the harmonisedprinciples and rules will ensure there is noscope for ethical arbitrage,” he adds.“Different regions applying their owncodes of conduct could have unintendedconsequences and drive trading to less-stringent regulatory jurisdictions, and weare pleased that this scenario has beenavoided in the major financial centres.Harmonisation is also beneficial forregulators, as they can measure thebehaviour, ethics and conduct of allparticipants by the same criteria –regardless of geographical location – andany misdemeanours can be immediatelyidentified and addressed.”The FX committees’ document supersedesthe Codes of Best Market Practice andShared Global Principles published by thevarious Foreign Exchange Committees in2013.The eight-page document says that FXmarket participants are expected to reviewand incorporate the updated guidelinesinto their individual firm's policies andprocedures. “These policies shouldprovide sufficient guidance, includingexamples where appropriate, for staff tobe able to distinguish between acceptableand unacceptable conduct in a variety ofsituations they may encounter,” thedocument states. “In order to raiseawareness and compliance by relevantpersonnel with the FX policies, aprogramme should be established for the

training of such personnel on the FXpolicies.“FX market participants should alsoconsider, as appropriate, adopting aprocess by which relevant managersperiodically attest to the supervision oftheir staff with respect to compliance withthe FX policies,” it adds.The FX committees involved in the workare the Australian Foreign ExchangeCommittee, Canadian Foreign ExchangeCommittee, the European Central Bank’sForeign Exchange Contact Group, theHong Kong Treasury MarketsAssociation, the UK Foreign ExchangeJoint Standing Committee, the New YorkForeign Exchange Committee, theSingapore Foreign Exchange MarketCommittee, and the Tokyo ForeignExchange Market Committee.These bodies work closely with eachother to share information on variouslocal projects and initiatives and toexchange views on events in the foreignexchange industry. The new documentstates, “In order to promote more robustrisk management practices among globalFX market participants, there is sharedsupport for certain high-level principleswhich are set out in this document andunderpin the existing codes (and theguidance therein) promulgated by thevarious committees.”The new guidelines include the demand todevelop and promote a strong culture ofethical behaviour and standards ofconduct; promote awareness and use ofgeneral dealing practices, procedures andconventions; ensure accurate and timelypre-trade preparation and trade capture;support robust and efficient back officeoperations including confirmation,netting, payment and settlement; andmitigate risk in FX transactions from thepoint of initial discussion regarding apotential transaction to settlement.The document lays out recommendationsfor personal conduct amongst allparticipants, and stresses that any marketparticipant and their institution “may beheld accountable for any breach of FXpolicies that violate fair market practices,damage the reputation of the FX marketparticipant and profession or underminethe integrity of the FX market”.It also states that participants must haveeffective policies and controls in place todeal with individuals who have behavedinappropriately, including reportingrequirements to local authorities.

Escalation procedures should be in placeto allow individuals to report suspiciousbehaviour, and “Individuals working forFX market participants should feelconfident that any information reportedunder these procedures will be dealt withseriously and effectively, and that thereporting will not be to their detriment.FX market participants should beaccountable for the integrity of thesepolicies and for ensuring the protection ofstaff that make such reports,” thedocument states.On the crucial subject of confidentiality,the document says that marketparticipants must have well documentedpolicies and procedures in place, as wellas sufficient systems and controls toprotect FX trading information within thedealing environment and other areas ofthe market participant which may obtainsuch information. They should also ensurethat personnel have been trained withrespect to such policies. These policiesshould also prohibit counterparty andcustomer anonymity from beingcircumvented through the use of slang orpseudonyms, both externally andinternally.It also says their personnel should betrained to identify designated confidentialinformation appropriately in accordancewith internal policies and proceduresincluding the manner in which suchinformation must be handled, and to dealappropriately with situations that requireanonymity and discretion.The participants should also ensure thecommunication technologies used totransmit trading information anddesignated confidential information arereasonably designed to be secure,monitored and protected againstunauthorised access. “Appropriate stepsshould be taken to prevent the leakage ofsuch information through various kinds ofcommunication technologies,” it states,adding that any misuse of tradinginformation or designated confidentialinformation should be investigatedpromptly according to a properlydocumented internal procedure.“FX market participants should not shareinformation with each other about theirtrading positions or individual trades withclients or other FX market participantsbeyond that necessary for the execution ofa transaction and subsequent transactionlifecycle events, ensuring that no

continued on p.17 !


Global FX Committees Unveil Top Level Guidance

16

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confidential information is disclosed,” thedocument states. “Furthermore, FXmarket participants should not pass on FXtrading information to other FX marketparticipants that might enable thoseentities to anticipate the flows of aspecific client or counterparty, includingaround a fix.“It is acceptable to share with customers aview on the general state of and trends inthe market (often referred to as providingmarket colour),” the document continues.“However, any market colour givenregarding market activity should besufficiently aggregated and anonymisedso as to not disclose FX tradinginformation or designated confidentialinformation.“It is not acceptable to discloseinformation on individual trades, specificcounterparty names and other non-publicinformation, except in accordance withthe standards set out above regarding FXtrading information or designatedconfidential information,” it adds.“Finally, FX market participants shouldexercise careful judgment in assessingwhether any information they receive(including, but not exclusive to,counterparty information) is true andaccurate.”The committees state that institutionsshould impose policies that require theirpersonnel to refrain from passing on

information that they know or suspect tobe misleading. These policies should alsoinclude the circumstances in which it maybe acceptable to inform customers about arumour prevalent in the market, and therequirements as to how thatcommunication should be handled.On execution policies, the documentstresses that participants should notengage in any practices “which could beheld to constitute market manipulation,abuse, fraud or anti-competitivebehaviour”. It adds that all firms shouldidentify potential or actual conflicts ofinterest and take measures to eliminate orcontrol these conflicts.The document concludes, “In accordancewith the FSB’s Foreign ExchangeBenchmarks Report’s recommendations,FX market participants should establishand enforce their internal guidelines andprocedures for collecting and executingfixing orders. If a firm engages in fixingtransactions, those transactions should bepriced in a manner that is transparent andis consistent with the risk borne inaccepting such transactions. Finally, FXcustomers (including asset managerspassively tracking an index) shouldconduct appropriate due diligence aroundtheir foreign exchange execution,including assessing the suitability of FXreference rates used, and be able todemonstrate that to their own clients ifrequested.”

“The Global Preamble touches on manyof the issues addressed by ACI FMA in itsupdated Model Code for 2015,” saysBailey. “A central component of theagreed rules and ACI’s Model Code isensuring that individuals are educatedabout the appropriate ethical standardsand behaviour expected of them by theiremployers and the market, and theconsequences for them as individuals ifthey choose to engage in illegal orunethical behaviour. “A universal code of conduct, withcomprehensive guidelines and bestpractices will help in providing a moralcompass and guidance to which allprofessionals can adhere,” he continues.“The Model Code has been the marketgold standard for ethical behaviour fordecades, but testing and measuringknowledge of the Code is also critical. “ACI’s new e-learning and certification(ELAC) Portal has already embedded thewording from the Global Preamble,making it as up-to-date as possible, andwill allow members to test theirknowledge of The Model Code andbenefit from interactive scenarios todemonstrate how the conduct rules can beapplied in a variety of situations,” headds. “Measuring and monitoringprogress is central to behavioural changeand the ELAC Portal is designed toensure any knowledge or conduct gaps areswiftly addressed by supervisors.”

Foreign exchange trading activity inthe UK and US rose to record levels inOctober, reports from the nations’ FXcommittees show, on the back ofincreased volatility that was largelytriggered by a divergence in monetarypolicies.

Average daily currency turnover in theUK rose to a record $2.67 trillion, up 11%from $2.4 trillion in April 2014 and 19%higher than $2.2 trillion in October 2013,according to the Bank of England’sForeign Exchange Joint StandingCommittee (JSC) in its 21st semi-annualturnover survey.“This is the highest level of turnoverrecorded since survey inception,” the JSCsays.Average daily volume in North Americawas $1.1 trillion, the highest since thesurvey began in 2004, according to theFederal Reserve-sponsored Foreign

Exchange Committee. This is a rise of35% from $811.1 billion in April and 34%higher than $816.3 billion recorded inOctober 2013.In the UK, turnover in most products roseto new survey highs. FX spot turnoverclimbed 40% to $1.1 billion per day, up44% year-on-year, with turnover inEUR/USD rising 18% from April to arecord $805 billion per day. FX swapturnover was the only product to fallcompared to April and was down by 14%.Average daily spot volume in the USincreased 62% to $570.7 billion comparedto April. Similarly, FX options volumeincreased by 66% to $64.8 billion andforwards volume rose by 20% to $220.4billion. Swap volume remained flat at$239.3 billion.Implied volatility rose in October, amonth after the European Central Bankcut interest rates to record levels tosupport economic growth and reviveinflation. In the US, the Federal Reserve said itwould end a bond-buying programme just

days before the Bank of Japanunexpectedly increased bond purchasesunder its quantitative easing stimulusstrategy on 31 October.The diverging policies, combined withwidespread political risk, have helpedboost a recovery in trading over the pastfew monthsIn Japan, turnover in average daily tradingwas $373.2 billion in October, up 3%from $362.9 billion in April and flat year-on-year, the Tokyo Foreign ExchangeMarket Committee reports, while inSingapore, daily turnover was $319.5billion, a rise of 10% from April’s $290.5billion a day and 13% higher than $282.2billion recorded in October 2013. In Canada, turnover on an average dailybasis rose 3.8% to $60.4 billion inOctober from $58.2 billion in April.The Australian FX Committee was theonly to reveal a drop in volume, bothmonth-on-month and year-on-year.Average daily volume was $150.3 billion,a decline of 14% from April, and 15%lower over the year.

FX Volume Higher

FX Committees. Continued from p.12

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