For many years one of the main focuses of the Global Forex Commission (GFXCMore) has encouraged greater adoption of FX A global code among buy-side market participants. However, since the code was updated in 2019, GFXCMorehas had rather limited success in this endeavor.
Of the 1,162 financial firms that signed, according to the commission’s official register, FX The Global Code’s 12% to date include asset managers, corporate treasuries, hedge funds, insurance companies, pension funds and sovereign wealth funds. This is a slight improvement from 2019, when only 9% of buy-side code signers were.
However, the majority of buy-side market participants feel that the code has not been fully applied and are reluctant to sign up. Others have suggested that a simpler version should be created to help buy-side firms strengthen compliance.
Nevertheless, GFXCMoreunder the chairmanship of the Swiss National Bank Andrea Mechler, remains determined to encourage acceptance from the buy side.
For example, the Commission is prototyping a web-based tool that will allow buy-side participants to identify which principles of the Code apply. This lowers the barrier of entry to signing up. The tool GFXCMorewebsite will be launched later this year.
However, potential carrots currently being considered include appealing to the environmental, social and governance of the buy side (ESG) concern.
To achieve this, GFXCMore We are considering a possible partnership with ESG Rating agencies – possibly Sustainalytics and MSCIThis allows anyone who signs the code to recognize that it satisfies the “G” factor of the code. ESG commitment. In theory, this would boost overall profits for buy-side firms. ESG Score if it becomes a signatory – something trading bodies such as the Global Financial Markets Association have long lobbied for.
Given the growing interest of the capital markets in responsible investing, this could well prove to be an effective strategy to boost buy-side adoption of the code of conduct. Many asset managers and institutional investors have already signed up to the United Nations Principles for Responsible Investment, ESG to their investment policies and practices. FX Adherence to the Global Code can go a long way toward achieving these goals.
According to Global Head FX Sales in European banks could also help rebalance the market approach. ESG, ‘E’ tends to dominate conversations and transactions. This is mainly because environmental indicators, such as the amount of carbon a company emits, are easier to quantify and measure than governance indicators, such as the extent to which women are included in a company’s decision-making processes. .
However, there is a distinct difference between signing code and actually adhering to that principle.Businesses could easily sign up to get a boost ESG Score but do very little to implement the principles. It will therefore be interesting to see if or how continued adherence to the code is monitored in relation to the behavior of signers. ESG Score.
on the other hand, GFXCMore While it has not yet publicly commented on such a potential partnership, it ESG Rating agencies FX Market-wide: driving the adoption of buy-side code and potentially FX Overall Focus and Engagement of the Market – ESG It is important.
The latter certainly needs a push. For example, several banks have entered the market in the last two years. ESG– linked FX We do hedging with asset managers and companies, but these are mostly one-off deals. We have yet to see any real progress in this area.