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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)
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