FICC Markets Standards Board issues draft guidance on reference pricing

Source: FICC Markets Standards Board

The FICC Markets Standards Board (“FMSB”) has today published its first standard aimed at improving conduct in the wholesale Fixed Income, Currency and Commodities (“FICC”) markets.

The standard, which is being issued in draft form for comment, covers reference
price transactions in the fixed income rates markets.

Fixed Income reference price transactions, involve agreeing all aspects of a
transaction except price which is set later based on a pre-agreed reference price.

Elizabeth Corley, Interim Chair of the FMSB, said:
“The new standard is intended to give clear guidance to traders and market
practitioners about what is acceptable conduct in the context of these types of
transaction and create greater clarity about what good market practice looks like,
and what types of practice should be avoided.”

The FMSB is issuing the standard in draft form to provide an opportunity for public
comment ahead of final ratification and issuance.

Publication of the draft standard coincides with the first anniversary of the FMSB,
which was set up by market practitioners following the Fair and Effective Markets
Review (“FEMR”) to improve conduct in the wholesale FICC markets. It does this by
defining standards of good practice in contentious or grey areas of the markets.

The FMSB Market Practices Sub-Committees are currently working on standards in
a range of other areas such as commodity binary options and the new issue process
in fixed income markets.
The FMSB’s Conduct & Ethics Sub-Committee is also doing work to assess formal
wholesale FICC markets training programmes undertaken by member firms as well
as facilitated workshops with surveillance representatives from FMSB member firms,
focusing on the trade lifecycle in Foreign Exchange. The intention is to complete
papers summarising good practice in both these areas by the year end.

The Codes & Standards Convergence Sub-Committee has met with authorities in a
number of other countries to discuss international convergence of standards.
The FMSB has 36 members reflecting the diversity of participants in the wholesale
FICC markets. They include international users of the markets such as corporates,
asset owners and asset managers, market infrastructure providers such as
exchanges, custodians, and investment banks.

Elizabeth Corley said:

“The FMSB has benefited from a strong and continuous level of engagement from
members of Standards Board and Advisory Council, drawn from senior practitioners
and experienced independents. We look forward to continuing to engage with both
members and other stakeholders on our forward agenda.”

The FMSB is seeking comment from interested parties on the new standard over the
summer. Submissions should be sent to by midday (12:00pm
BST), Thursday 8th September, 2016. A final version of the standard will be
published by the FMSB after evaluating public comments.
The FMSB’s second standard will be issued in draft form in the coming weeks and
covers Binary options in the commodities markets.

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