BACKGROUNDER ON CODES OF CONDUCT IN THE CANADIAN FOREIGN EXCHANGE MARKETAdoption of Updated Guiding Principles for Conduct in the Canadian Foreign Exchange Market
On 5 May 2015, CFEC adopted revised “Guiding Principles for Conduct in the Canadian Foreign Exchange Market” (Guiding Principles). These Guiding Principles, first adopted by CFEC in December 2013, have been updated to include the global foreign exchange (FX) committee guidance endorsed by CFEC and seven other FX committees on 30 March 2015 (Global Preamble: Codes of Best Market Practice and Shared Global Principles) and also the Financial Stability Board’s Foreign Exchange Benchmarks Final Report published in September 2014.History of Codes of Conduct in Canada
From its inception, the purpose of CFEC’s code of conduct has been to provide participants in the FX market a common set of principles that will foster a high standard of professional conduct, reduce operational risk and promote efficiency in the FX market. CFEC provided its first guidelines for professional conduct in 1990, shortly after CFEC was founded in 1989. In 1997, in cooperation with the Canadian Committee for Professionalism (CCFP)1 and the Financial Markets Association of Canada (FMAC)2, CFEC issued updated best market practice guidelines.
In 2001 CFEC, along with CCFP and FMAC, had adopted the ACI Model Code as the standard for best market practices in the Canadian FX market. The Model Code was first published in 2000 by ACI - The Financial Markets Association, the global umbrella organization of foreign exchange associations. It combined the recommendations from six pre-existing codes of conduct (those of New York, London, France, Singapore, Tokyo and the original ACI Code) and is updated through a regular review process by the ACI Committee for Professionalism.3
In 2004, the Canadian Operations Managers Working Group (OMWG), a subcommittee of CFEC, endorsed two best practices documents that are published by the New York Foreign Exchange Committee. The first publication, Management of Operational Risk in Foreign Exchange, recommends 60 best practices for financial institutions to use as a resource or checklist for when they regularly evaluate their policies and procedures to manage operational risk. The second publication, Recommendations for Nondealer Participants, is a condensed version of the 60 best practices that is geared towards nondealer participants. Two members of the Canadian OMWG participate in the meetings of the New York OMWG.
In 2005, the Chairs of CFEC and CCFP, and the President of FMAC, wrote to CFEC members to recommend that all personnel in the Canadian FX market have a minimum standard of knowledge equivalent to the information contained in the ACI Dealing Certificate. Those who did not meet the minimum standard of knowledge were encouraged either to obtain the Certificate or to take some other course(s) that cover, at a minimum, the same material.
In late 2012 and early 2013 CFEC collaborated with seven other FX committees in the drafting and publishing on 29 May 2013 of a global statement on “Codes of Best Market Practice and Shared Global Principles”.
On 9 December 2013, CFEC adopted “Guiding Principles for Conduct in the Canadian Foreign Exchange Market” (Guiding Principles). This was the outcome of a review initiated in late 2012 that concluded that the endorsement of a single code of conduct for Canada by CFEC was no longer appropriate. These Guiding Principles consist of two elements: the five shared global principles embedded in the global statement that was published by CFEC and seven other FX committees on 29 May 2013, and a commitment to take into account relevant regulations and reference codes.
1. The CCFP was disbanded in January 2013.
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