our latest newsletter

Your personal member update of what’s happening in the
world of Financial Markets.
March 2015
launches Online Model Code
The new 2015 ACI Model Code is ready for release. In it, we not only continue to
provide practical guidance on ethical conduct in wholesale financial markets, but
ACI launches Model
Feedback from ACI Congress held in Milan
ACI in the press
we also provide new guidance on certain areas like “last look”, which is so important to the electronification of markets.
Providing Guidance ● ELAC: eLearning and Certification Portal
● Available to all institutions and individuals globally
Secondly, we are announcing the ACI Model Code eLearning and Certification
Portal, or ELAC, available on-line to our members, to answer the global industry
ACI Africa: News and Events
call for the licensing regime. While we believe in further education, not further
Training Solution providers
for the ACI.
regulation, we stand ready and able to provide exactly the training so demanded
across the FICC markets. We stand prepared to do whatever is necessary to work
with the global regulators to provide exactly the licensing regime required.
Not only that, we are announcing the ability to make this conduct and trading
education available to all institutions and individuals globally, to match the
needs of local and international regulators to create a level playing field across
markets. We agree with the industry that we must avoid the opportunity for ethical arbitrage across time zones, so that all traders behave consistently ethically,
in accordance with established and acceptable global industry norms.
Continue reading on p.2...
SARB endorses ACI Dealing
ACI Model Code (continued)
Our ACI Model Code, long established as the
for our people, and we have been bringing
global leader in cross-jurisdictional conduct,
the benefits of the ACI Model Code to life for
has been written with both the sell side and
our members. We answer this need for a
the buy-side in mind. The new acronym ELAC
testing regime – and we can offer all employ-
not only stands for the eLearning and Certifi-
ers the ability to prove internally and to their
cation Portal, it can also stand for eLearning
clients that they have done their best, and
Annual Compliance Portal. We are offering
received the endorsement of their manage-
the chance to have constant updates and
annual reminders of your obligation as professionals to maintain the highest standards.
Our 2015 Model Code, released in Milan, is
ready for inspection. Our ACI Model Code self
ACI Model Code
Focus Areas
We believe that traders at hedge funds, asset
-certification exam is ready for roll out across
managers, central banks and other non-bank
the financial markets, and our employers will
organisations should be subjected to the
be encouraged by its availability around the
same professional qualifications requirement
world. We can self-certify, we can demon-
to ensure “a level playing field”. Our Code has
strate that ACI membership has tremendous
been written with this in mind, and with them
value. And courtesy of some technology part-
at the table. We are already endorsed by a
ners, we can do this on a global scale. Go to
number of important industry bodies.
our new website and see!
Recent events in the markets, such as the
We are in command of our own ship, driving
change in SNB policy on the Swiss franc cap,
the financial markets to re-establish ethical
announcements of QE by the ECB, and other
conduct and best practice.
activity, have led to some challenging trading
conditions. While the size of the Swiss franc
2015 will be a very important year for us as
Same professional qualifications
move is unprecedented in currency market
we continue this rapid pace of delivering on
requirements for traders at
history, it does serve to illustrate the need for
our promises, and getting all of the opportuni-
various financial institutions.
adequate systems, procedures and controls in
ties within ACI to come to the surface. Take a
the front office, operations and in risk
look at what we have accomplished together
in the past 10 months and over the last 60
Adequate systems, procedures
and controls in the front office,
operations and risk management.
ACI offer dispute resolution and
arbitration services
2015 Model Code ready for
years. It is amazing. It is the rightful output
We recommend that the market participants
from our Association with its roots in Paris in
refer to The ACI Model Code, which has sec-
1955. Thank you all for listening, and may you
tions on a number of issues that have arisen
join me in being proud to be a member of ACI
recently. David Woolcock will be saying more
Financial Markets Association.
on this soon.
Further, we remind people that the ACI Finan-
Certification exam ready for roll
cial Markets Association offer dispute resolu-
out across financial markets
tion and arbitration services that may be
engaged and deployed, should these services
be required. We at ACI have rigorous training
Our ACI Model Code can be found here.
“We are here for you” - keeping members informed
about relevant local and international developments.
MEET David Woolcock:
David is the Global Head of Sales &
Business Development at Eurobase
and also chair of the Committee for
Professionalism (CFP), responsible
for advising the ACI Executive Board.
David is also the Vice-Chair of the FX
Committee which in concert with
regulators and other FXC’s work to
promote a common global, orderly
and transparent FX market and to
lobby on regulatory issues as
ACI Global
Speech from the ACI President at the ACI World
Congress in Milan
ACI has grown tremendously since its inception in 1955… our history is deep
and varied, and benefits us in many ways. I believe that while our strength is
evidenced by the work that takes place at national level, our unity comes
from recognising that we are stronger together. Together we form part of the
international fabric of the financial markets. Our history of growth and relevance to the markets, and the list of the accomplishments of people that
have gone before us, reminds us that we have a duty to help our members,
and an obligation to leave the ACI in an even stronger position that when we
inherited it. The future of our Association is bright, and we are growing. While
we are right to be proud of our past, we must focus on our future.
Marshall Bailey, ACI President
As leader, and in tandem with the ACI Committees and Boards I attend, I have
made strict application of three filters to drive what we do… each decision we
take, and each path we forge at International level, must pass by this simple
test: 1) Are the decisions we are making, benefitting ACI members internationally? 2) How might the deployment of our membership fees and revenues
from education help us to grow, and what returns might we expect for future
generations? 3) Are we spending time in areas that each person will benefit
from, or just a few, and will each member be able to bring this growth to the
benefit of their national, regional and international teams. As we know in
sailing, a rising tide can lift all boats. ACI International must help the tide to
come in, and bring all of our current and future members the opportunity to
be proud of ACI.
It has been approximately 10 months only since I was inaugurated at the ACI
World Congress in Berlin in late March of 2014. The leaders of ACI Germany
put on an amazingly well-organised event. It was at the same time, less than
one year ago, that I laid out a vision for ACI Financial Markets Association.
The vision is to be recognised as the financial markets association of choice
for ethical conduct and best practise, and to provide self-certification in the
wholesale financial markets industry.
Our three main committees have accomplished a tremendous amount over
the years: Just look at the growth of the educational offering of ACI – we now
not only have the ACI Dealing Certificate, so coveted around the world, and
the Operations Managers Certificate, but a
whole series of modules leading to the ACI
Diploma. In my travels over the past 10
months, responding to the requests of
various national ACI leaders, I have had
the pleasure of meeting young men and
women who have recently taken our
courses. I have attended events in places
such as Beirut for the 50th anniversary of
ACI Lebanon, the annual congresses of ACI
Austria and ACI Czech Republic, and listened to lists of local members congratulate each other as they cross the stage to
receive their certificates.
Continue reading on p.4...
Speech from the ACI President at the ACI World
Congress in Milan (continued)
The ACI FX Committee has responded to
some important surveys, such as the
Financial Stability Board’s request for
answers as they consulted with the market on FX benchmarking, and to the Bank
of England’s Fair and Effective Market
Review, which closed for consultation
just last week. Of particular note is the
Chair of that Committee, Mr Stephane
Malrait, who brings it all together, and a
special mention to a wonderful lady
named Anne-Maria Rothenstein who is
unable to be here this evening, but has
given her time freely to review our documents and contribute so solidly.
Attendance at the ACI
World Congress
The congress was attended by
1450 delegates from all over
the world.
Brigid Taylor, ACI SA President,
represented Africa on the ACI
Managing Board
Saiyuri Charles, SA Treasurer,
represented SA and proxy
votes for Kenya,Mauritius,
Ghana, Zimbabwe, & Uganda
However, ACI is an organisation that
includes increasingly diverse types of
members, and we must ensure we cater
to their interests and needs as well, and
that we demand a lot of the leadership
in these areas: ACI Italy is a great example of a body that holds professional
members from FX, of course, but also
from Money Markets, Treasury and Asset Liability Management, Fixed Income
and a wide variety of other activities in
the wholesale markets. There is room for
leaders to step up globally and lead
these areas, and we welcome your contribution.
The same is true of perhaps our most
visible Committee, the Committee for
Professionalism, which for years has
been the keeper of the ACI’s worldfamous and respected Model Code. The
ACI Model Code is in very strong demand
as the scandals of FX manipulation and
Libor setting have costs us all so dearly.
It is Mr David Woolcock and his team on
the CFP that have held the light high,
and who have shown that we, as a diverse Association of volunteers, can
teach the financial community about
best ethical practices, and that many
bankers are focussed on ethical conduct.
While so many large players seem to
have forgotten that ethical conduct and
trust are the single most important aspect of trading, that “Our Word Is Our
Bond”, our ACI CFP has held the answers. And now, as the world seeks answers to these challenges, we as the ACI
can provide them.
Over the past months the Bank of England has been leading the industry-wide
consultation known as the Fair and Effective Markets Review. It intends to focus
on providing fair and effective markets
to assist with growth in the global economy, and will review all products across
the Fixed Income, Currency and Commodity space, also known as FICC.
Among the FEMR work is a review of the
need for ethical conduct training, and
ethical conduct rules, and how these
rules and training packages might be
applied globally.
Globally similar yet distinct regulatory
regimes means that the central bankers
and regulators themselves need to allow
our 24 hour a day market to function by
endorsing the best practices in the market. If the central bankers know how
these markets function, they will be
ready to endorse our proposals, as our
proposals are not only global, they are
best practice.
There is another saying that sailors use:
The expression is: If you don’t know to
which port you are sailing, no wind is
favourable. We know where we are sailing, and we are guided by our Model
Code and best industry practices. It is
not just the ACI and the Bank of England
that is calling for ethical conduct and
training: earlier this week the Financial
Times reported that the British Bankers
Association is also calling for regime
Fair and Effective Markets Review and ACI
This paper is the result of considered debate amongst the members of the ACI
FMA appointed leadership and members, and is intended to provide our unbiased replies to the issues discussed in the FEMR Consultation on FICC, prepared
by the FEMR team. The ACI FMA welcomes the opportunity to engage with the
FEMR on this subject.
The ACI believes that the debate about the role of a variety of subjects within
the FICC markets is a positive development, and should take place in a public
forum. The benefits of transparency on the debate are numerous, and include
the need for the public to understand market complexity, and the benefits that
the broader economy derives from having fair and effective markets in continuous operation. For this reason, the FEMR Consultation Document, and the responses from the various market participants to the document, will help the
regulators, industry participants and the public to be better educated on the
structure and uses of the fixed income, currency and commodity markets. The
greater awareness that comes from this knowledge will assist the industry in
assuring that best practices, especially ethical conduct, are followed.
Importantly, the ACI welcomes the elevated importance that the Consultation
Document places on the behaviour and ethical conduct of individual market
participants. The FEMR Consultation Document reflects the need for individual
behaviour to be held to the highest standards of ethical conduct, and mentions
the ACI Model Code.
Key Message
The ACI FMA is firmly of the belief that the ACI Model Code should be adopted
formally by the industry on both the “buy-side” and the “sell-side” and applied
across the globe. As is stated by the FSB Consultative Document on Benchmarking, for codes of conduct to be effective they must be adhered to. The use of a
single, globally recognised, industry-wide, unbiased code, that addresses the
specific issues of the foreign exchange market (among others) will provide a
tremendous amount of value to this challenge. Disseminating conduct expectations and training staff on the uses of the sections of the ACI Model Code
should be a minimum requirement for market participants. The ACI strongly
endorses the application of the ACI Model Code to the ethical and behavioural
issues addressed in the FEMR Consultation Document.
The ACI FMA also reminds the reader that the ACI Model Code makes a clear
statement about the responsibilities of management and supervisors to ensure
that codes of conduct are adhered to. Single-platform (company) and national/
regional codes may sit alongside a global code, but there should be few (if any)
differences in the application of these codes on market practice. Any differences increase the risk of ethical arbitrage amongst market participants, and
give rise to the issues about which the Consultation Document was written. For
this to be effective, the regulators need to agree to the terms, understand both
the code’s guidelines and how they are applied, and allow individuals and institutions to be confident that following these guidelines will be accepted as appropriate.
Download ACI response here.
Hot off the press
Marshall Bailey, President, ACI – The
Financial Markets Association, Paris,
The central issue in the recent FX
scandal remains not so much the
structure and operation of the market as the behaviour and ethical conduct of individual participants, which
ideally would be the adherence to a
global set of standards that are internationally applicable.
It is for this reason that we welcome
the co-ordinated consideration by
central banks and global regulatory
bodies of the adoption of an international code of conduct to govern the
rules and behaviour of financial market professionals as individuals.
The ACI’s Model Code clearly defines
the principles and ethics that professionals should adhere to in order to
uphold market standards. It is the
logical bedrock for a formally adopted global standard governing behaviour and ethics across financial markets .
By implementing these standards,
financial markets demonstrate their
work to regain public trust in its institutions, underpinning global commerce. More progressive banks and
clients have already decided to return to the ACI Model Code, and are
showing leadership. We provide a
moral compass and a global standard to which all professionals can
adhere, regardless of institution,
market segment or region.
Regulation by itself is not the answer. FX is a global market, and regional regulation would be both
costly and ineffective and lead to
regulatory arbitrage and other unintended consequences.
Likewise, the existence of competing
model codes risks creating an uneven playing field, creating a lack of
clarity and further distorting a market that is fracturing due to other
areas of national/international regulation.
Further convergence of the global
codes has been discussed. The Bank
of England’s Non-Investment Products Code directly references the ACI
Model Code as the standard for market conduct. In addition, the European Central Bank and a wide range of
central banks formally endorse the
ACI Model Code.
When it comes to market reform, it
is as critical to avoid ethical arbitrage, with different regions and
institutions applying their own codes
of conduct as it is to avoid regulatory
arbitrage, which tends to drive trading institutions to less-stringent regulatory jurisdictions.
While a number of complex components of the industry are being reviewed, individual behaviour must
not be forgotten.
Financial market participants must
be trained properly, and held to a
very high standard.
This must be backed up by appropriate legal systems that can deal with
any malfeasance. Get the wrongdoers out, by all means, but let’s assist
those seeking to evolve and improve
to do so.
“...adherence to a global set of standards that are
internationally applicable…”
Hot off the press
Colin Lambert writes:
There are people in this industry trying to shoot themselves in the foot, but the collateral damage
will include the wider industry.
The losses from last week’s event continue to build as more are revealed, especially in the hedge
fund world where BlueCrest and Fortress are both reported to have taken a serious hit and in the
case of the former, shut one of their funds. They are not the first and won’t be the last.
But that is not what is worrying me.
If I may philosophise for a moment, in life one has to take the ups and down – think Kipling. It is
the same in trading, sometimes you just have to take losses.
I cannot think of a bigger PR disaster than chasing clients for losses after you unilaterally changed
the rates on their trades. Not only is it awful PR, it is likely to end up costing nearly as much in legal
fees when the inevitable happens and the lawyers get involved.
My understanding is that one or two banks in the immediate aftermath of the mayhem were trying
to change rates but very quickly realised this was not a good path to follow. Saxo Bank clearly didn’t get that memo and now finds its name splashed over the world’s press chasing down small
investors for money they don’t have after the bank unilaterally changed the rates it offered on
executed trades. A good example of the press can be found here
This brings home the fear I expressed on Monday, that institutions will try to push the loss onto
the individual. This cannot end well for the industry.
It’s a tricky one of course, because Saxo clearly believes it is on solid legal ground, it has a Product
Disclosure Statement that covers just about everything, but is it? The problem is that the system
generated trades and then the institution tried to roll them back. What would have happened had
a voice trader quoted those prices, or exercised those stops? The trade would have to stand I
would have thought?
I have written previously about how best practice guides need updating to better reflect the modern market and this is yet another example of that. ACI – The Financial Markets Association has
done a tremendous amount of work to update its Model Code, but this highlights just how much is
left to be done.
Part of the problem last week was systems generating trades automatically from stop loss orders.
The Model Code has a clause about stop losses on e-platforms, it reads as follows:
“Additional attention should be paid where e-trading platforms automatically execute stop-loss
orders. In accepting these orders, whilst an institution assumes an obligation to make every reasonable effort to execute the order promptly, there is no guarantee of fixed price execution to the
counterparty unless otherwise agreed by both parties in writing (my italics).”
The Model Code is the most comprehensive best practices guideline out there but even that
cannot yet cover everything. The closest I could find is in the “Dealing Through Brokers” section,
which states, “Dealers should regard themselves as bound to a deal once the price and any other
key commercial terms have been agreed.”
“...The Model Code is the
most comprehensive best
practices guideline out
there but even that
everything. The closest I
could find is in the
Brokers” section, which
states, “Dealers should
regard themselves as
bound to a deal once the
price and any other key
commercial terms have
been agreed.”
This could conceivably be transferred to the electronic market, but then the Code goes onto state,
“However, holding voice brokers unreasonably to a price is viewed as unprofessional and should
be discouraged by management.”
The problem facing the best practice codes (and probably the lawyers when it gets to that stage) is
how to decide whether holding someone offering auto-stops to a price is “unreasonable”?
Continue reading on p.8...
Hot off the press (continued)
The problem for everyone here was that there were trades at most big figures all the
way down – the amounts were minimal but trades were executed and that removes the
threat of them being “off-market” which would involve a cancel and re-book. The market
traded there so it could be reasonable to assume that the institution concerned could
cover the trade. But of course it wasn’t able to.
In a voice driven world, as The Model Code states, there would be no guarantee of the
rate, the trader would not guarantee the level, especially in such a high risk situation
(and we all knew there were huge stops below 1.2000) so why should stops be guaranteed in the electronic world? Well they shouldn’t, but here is the problem. The system
generated a trade, it was matched and in many cases sent to CLS or a prime broker,
where it was again matched and the admin done.
At what point does a trade become a trade? It sounds a silly question, but current events
are bringing this into question. I would have thought when the trade is confirmed by
both parties then it’s done, which is a bit of a problem in the e-world, where autoconfirmations speed up the process to the extent that the only thing likely to stop these
trades getting down is pulling the plug on the platform.
Of course, pull the plug on the platform and you pass the buck to your clients, but it’s
probably a more subtle way of stuffing them than going after the clients after the event.
Your credibility will be damaged, but not destroyed – cynical as that view may be.
My personal view is that the parties simply need a log of trades on EBS for EUR/CHF on
January 15. If the market traded within 100 points of the stop then there was a legal
trade in the market and unfortunately that’s the way it goes for the institution.
The problem is though, that it’s a very dangerous precedent saving your clients from
massive losses. Those brokers that honoured the stops and took the hit themselves appear to be having a field day telling everyone how they wouldn’t dream of changing
rates like some others. All well and good, but they are also effectively saying to their
clients they would do it again. What happens if an even bigger event happens (I can’t
think it will, but then none of us foresaw the magnitude of last week’s mayhem). What
happens if they cannot or will not? We’re back in the courts.
For now though, and from a personal point of view, I would really prefer those that have
made money day-in-day-out from their customers take their hit when it (very occasionally) comes along. Also, these events highlight the amount of work facing those managing
best practice guidelines and stresses how they need to ensure they more accurately reflect the modern market.
It may be legally OK to change these rates (I’m still not sure), but morally it looks wrong
– it just looks like the big guy beating up on the little guy while he’s down.
ACI hosted the Chair for The ACI Committee
for Professionalism
ACI hosted the Chair for
The ACI Committee for
breakfast at the Hyatt on
3 March. The discussion
was focussed on ACI's
commitment to the industry to assist financial institutions to be compliant
and apply global best
practices with the implementation of the ACI
Model Code online continuous learning tool."
ACI also presented at the
Annual Thomson Reuters
Trading Africa Summit in
Cape Town from 4-5
March - Regulations and
ethical principles were a
hot topic and the market
both offshore and in Africa recognises the impact
ACI is making globally.
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us here.