The UK Financial Conduct Authority (FCA) has released a statement confirming its recognition of the updated FX Global Code. As part of that statement, the FCA also clarified its view that it is not consistent with the principles in the Code for FX providers to delay a client's trade request beyond the time needed to complete price and validity checks as part of a "last look policy" in order to see if future price changes would increase FX provider margins.
Specifically, the FCA stated "market participants should not prolong the duration of the last look window for the purpose of seeing if future prices move in their favour in relation to the client's trade request."
This kind of practice has occurred in the marketplace, and has meant that companies have paid unfair prices for their FX trades. An example of a particularly egregious abuse of this practice was the recent case in the U.S. where Wells Fargo was fined 72.6 million USD for unfair and fraudulent FX practices, which included delaying client's trade execution to find a price that better suited its margins.
These practices also highlight why it is important to pay attention to time-stamps that relate to when a trade is ordered and when it is executed.
What is the FX Global Code and what does it say about time-stamps?
The FX Global Code was developed as an effort between central banks market participants in 20 jurisdictions around the globe to promote principles of good practices in the wholesale foreign exchange market.
The FX Global Code addresses time-stamps, and was written
"to apply to all FX Market Participants that engage in the FX Markets, including sell-side and buy-side entities, non-bank liquidity providers, operators of FX E-Trading Platforms, and other entities providing brokerage, execution, and settlement services."
According to Principle 36 in the FX Global Code,
“Market Participants should apply sufficiently granular and consistent time-stamping so that they record both when an order is accepted and when it is triggered/executed… Information should be made available to Clients upon request, to provide sufficient transparency regarding their orders and transactions to facilitate informed decisions regarding their market interactions.”
You can search whether your FX provider has signed up to the code here.
Detailed time-stamps on FX trade confirmation receipts help protect corporate FX customers
A key part of controlling corporate FX costs and managing corporate FX is ensuring that trades are executed in a timely manner in alignment with customer agreements and expectations.
This is why it is particularly important for corporate FX customers to ensure that their FX provider is including the trade execution time-stamp in the receipts confirming their trades. The trade execution timestamp is information corporate FX customers have a right to view, but some FX providers exclude this information unless specifically requested by the customer.
FX providers should also provide the time-stamps with sufficient detail, such as including the seconds (and not just the minute) in the time-stamps they provide, and also making clear the timezone.
In a previous Just FX Blog, we have provided further detail for corporate FX customers on how to review trade confirmation receipts.
Time-stamps on FX trade confirmation receipts give corporate customers the power to get fair rates and fair margins
By checking trade confirmation receipts to review the time-stamps, corporate FX customers can monitor whether trades were completed in a timely manner and whether they received the prices they expected. It also enables customers to check whether they received fair rates through a process known as FX benchmarking, as the time-stamp is critical for such analysis. In a related Just FX Blog, we explain the importance and process of FX Benchmarking.
At Just, we make this process easier for our customers, who simply upload their FX trade confirmation receipts (PDF or excel) into their account on our FX Analytics platform. Our analysis process includes auditing for time-stamps and also using that information alongside other trade details to help corporate FX customers benchmark their trades to see if they received fair rates and fair margins.
Contact our experienced team at Just to learn more about time-stamp checks and FX Benchmarking.