Corporate treasury engagement with the FX Global Code has been slow, unlike at banks and financial institutions. Here are six compelling reasons why corporates need to sign up, including the benefit of more open and transparent FX trading relationships.
- Corporate treasury engagement with the FX Global Code has been poor, accounting for only two percent of all signatories to the FX best practice initiative.
- There are six compelling reasons for corporate treasurers to embrace the code, including the benefits of enhanced transparency and its support for ESG reporting.
- Refinitiv has a dedicated page within Eikon that delivers information and insights on the code, along with details on compliance with the code’s principles.
May 2017 saw the launch of the FX Global Code, an initiative that outlines best practice, and aims to boost the integrity and effectiveness of the global FX market.
The code outlines 55 principles within six overarching themes: ethics, governance, execution, information sharing, risk and compliance, and confirmation and settlement.
While the code has been adopted by almost 1,000 organizations over the past two-and-a-half years, the vast majority of these are banks, with other signatories including central banks, asset managers, pension funds, brokers, and e-trading platforms.
Notably, corporate treasurers have demonstrated sluggish engagement, representing just two percent of all signatories.
Refinitiv has been instrumental in uncovering the key reasons for this slow take-up, participating in events in London and Singapore to better understand the key challenges behind this apparent lack of interest.
Why sign up for the FX Global Code?
Here, we highlight six powerful reasons for corporate treasurers to embrace the code:
1. Enhanced transparency and service
Not only does the code advocate pricing transparency, it also provides best execution guidance on orders, including stop loss and limit orders, pre-hedging, mark up and last look, and trade confirmation.
By adhering to the code’s principles and signing a public Statement of Commitment to these, corporate treasurers can expect greater servicing levels from their banks because these measures guide sell-side participants towards more open and transparent trading behaviors, and enhance the relationships between treasurers and their banks.
2. Critical insights
The code presents insights on how all actors operate in the FX ecosystem. It delivers crucial insights into pricing, hedging and order management work, and the trade-offs that market participants must consider in order to achieve optimal results in their trade execution.
For large corporations it gives guidance on how to execute multi-billion dollar FX trades, which could move the market if not managed correctly.
3. Flexibility
The code is designed to improve internal practices, and is flexible to suit a wide variety of corporate business models and use cases. Through the concept of proportionality, it is designed to scale from the largest to the smallest corporate treasuries, without being over-heavy for smaller organizations.
It does not conflict with local laws, and instead focuses on values, behaviors and processes.
With many corporations operating across multiple jurisdictions and using treasury centers to centrally manage FX across entire regions, this approach avoids the regulatory barriers that emanate from individual countries having their own laws.
4. User-friendly information
Directives such as MiFID II and GDPR often include volumes of technical information that require compliance teams to assess each item, and communicate their findings to staff in easy-to-understand language.
The FX Global Code, however, is written with the end-user in mind. A user-friendly approach enables professionals to digest the code in their own time, and avoid the high costs usually associated with regulatory compliance.
- Valuable support for ESG reporting
The rise of environmental, social and governance (ESG) reporting has prompted stock-listed corporations to demonstrate robust governance across all operational areas.
As part of this, treasury departments are increasingly expected to outline their policies when engaging with FX suppliers and counterparties.
Corporations can leverage the code to demonstrate that they are executing FX activities fairly and in line with the highest industry standards. By doing so, they can access a widening pool of investors who will only hold stocks in companies that can demonstrate governance best practices.
- An opportunity to shape the code
The code is regularly reviewed by the Global Foreign Exchange Committee, which considers how the FX market is evolving, and recognizes the diverse needs of various stakeholder groups.
Reviews incorporate input from all code signatories, and as such create a valuable opportunity for inclusive industry dialogue. Signing up therefore offers corporate treasurers a chance to find their collective voice.
Support for all market players
As a provider of solutions to all participants within the FX ecosystem, and as a member of the FX Market Participants Group, Refinitiv is committed to playing an active role in the development of the FX Global Code.
In support of this commitment, we have created a dedicated page within Eikon (search ‘FX Global Code’ on Eikon) that offers information and insights into the code, as well as details of how Refinitiv can support adherence to and compliance with the code’s principles.