Being an FX broker comes with great responsibilities. Over the last few years, the financial sector has been trying to recover from a series of reputation damaging incidents and the only green shoots appear to be from brokers growing by adopting strong governance and high ethical standards.
A broker approved by the FCA, CYSEC, NFA, ASIC, CRFIN etc., is a prerequisite, but it just doesn’t and can’t end there in this day and age. A good broker now should uphold and embrace certain critical principles. A recently published Global Code of Conduct, developed by the Bank of International Settlement, offers a good starting base for brokers and could help them from coming across as untrustworthy and unreliable through the eyes of potential clients.
The guidelines include 6 leading principles for Market Participants:
- Ethics – Being honest, fair and acting with integrity and in a professional manner
- Governance – Having clear and robust policies and procedures to promote responsible engagement
- Information Sharing – Being clear and accurate in all communications, that is easy to understand without compromising confidential information
- Execution – Negotiating in a fair, integral and robust way, by which both parties are in an equal expressed agreement. Have clear standards, be truthful in statements and use unambiguous language in which execution in not designed to disadvantage the client.
- Risk Management – Effectively identifying, measuring, monitoring, managing and reporting on any risks that are associated with FX
- Confirmation and Settlement- Ensuring post-trade processes are in place to promote a predictable settlement of transactions.
In a world full of uncertainties, these guidelines have been very welcome in order to create a common reference point for everyone to prevent uncertainties about practices and processes. Once the guidelines are set, good practice can commonly underpin global trade to create a more consistent and effective trading environment. In turn, restoring public confidence with clarity and comprehensiveness.