LONDON (Reuters) - A new global code to stamp out attempts at rigging the world’s currency markets may need tweaking just months after it was published, a senior Bank of England official said on Tuesday.
Central bankers and the forex industry published a voluntary code of conduct in May in response to banks being fined billions of dollars for rigging currency benchmarks.
Chris Salmon, executive director for markets at the BoE, said an aspect of the code’s “last look” section may need changing. This refers to the ability for traders to reject a trade at the last minute.
Salmon said a specific issue of trading activity during last look was particularly challenging.
“What is clear to me is that there is, at the very least, the potential for misuse of this specific feature,” Salmon told an industry conference in Barcelona, Spain.
To keep the global code up to date as markets change, a global foreign Exchange committee or GFXC was created.
Chaired by Salmon, the GFXC launched a public consulation on last look in May.
“If we can identify specific, legitimate, uses of this type of trading activity, as well as the already well-known illegitimate uses, we can then cater for both within the Code,” Salmon said.
“But if the evidence suggests that trading in the last look window is simply inconsistent with good conduct, this section of the Code will need to be updated accordingly.”
Changing the code would force changes in the business models at some trading firms.
Salmon said the next potential code change is likely to focus on “post-trade” transparency.
Reporting by Huw Jones; Editing by Angus MacSwan