You may be aware of a story in today's FT titled "Forex Body Suggests Shift to Exchanges."
This article and the headline in particular is a materially inaccurate representation of the ACI's position, and we have complained formally to the newspaper on the grounds of inaccurate reporting. To better reflect the comments, the FT has changed the title of their story, which is now entitled “How to reform foreign exchange trading”
To be clear: ACI Financial Markets Association policy is that FX and fixed income markets trade effectively at the moment as they are, and serve the industry well. With the exception of unacceptable recent conduct of a few, these markets continue to serve clients and the economy. By using a combination of OTC, bi-lateral and multi-lateral electronic portals, and exchange trading, end-users in the industry have a number of choices to suit their particular needs.
These choices will undoubtedly be expanded in the coming years as markets continue to evolve. When and if clients see the benefits of a new system or venue, they may migrate in that direction. Exchanges are one of the choices currently available, and used successfully by some. They are by no means the only venue, and much of the market continues to respond to client FX needs through over the counter, including automated trading services. All markets evolve, and having this combination of choice available remains the best route.
By no means should my answer to the FT’s question on future feasibility of exchange-traded FX be interpreted as an endorsement of mandated change, nor should we be understood to be advocating a certain type of trading venue. As always, we at the ACI Financial Markets Association continue to be focussed on ethical conduct. As we have for decades, we advocate the education of the buy-side and sell-side, as well as the regulators, on industry best practice FX and fixed income markets. Our solution to conduct issues is for the globally accepted, well regarded and often adopted ACI Model Code be further integrated by market participants, and serve to provide a conduct benchmark against which behaviour can be monitored.
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The Code sets out global principles of good practice in the FX market to provide a common set of guidance to the market, including in areas where there is a degree of uncertainty about what sort of practices are acceptable, and what are not. This should help to restore confidence and promote the effective functioning of the wholesale FX market.