BoE urges hedge funds to adhere to FX global code

The Bank of England (BoE) may soon pressure hedge funds and trading venues to adopt the FX Global Code of Conduct, said Philippe Lintern, head of the central bank’s currency division.

Speaking recently, Lintern cited the Bank of Mexico’s approach, which requires firms to confirm their adherence or justify non-compliance in writing, as a model worth considering.

Introduced in 2017 to address misconduct in the foreign exchange market, the FX Global Code outlines principles to mitigate conflicts of interest and ensure ethical practices.

However, Lintern noted that hedge funds and some trading venues remain largely absent from the list of signatories.

“There are hard questions to be asked of those who choose not to adopt the Code or seek to remain unregulated,” he said.

Currently, buyside firms represent only 10 per cent of the Code’s signatories, a disparity that Lintern warned could undermine market trust and fairness.

He also called for stronger safeguards against FX settlement risks, highlighting gaps in existing systems like CLS, which exclude many emerging market currencies.

“The mitigation of FX settlement risk has not kept up with market growth,” Lintern added, urging market participants to revisit outdated settlement practices to prevent potential systemic risks.

Attribution: Bloomberg

Subediting: M. S. Salama