Minutes of the London FXJSC Main Committee Meeting - 25 June 2024

Minutes

Item 1 – Welcome and Apologies

Ms Saporta welcomed Adam Pickett (Citigroup), Jenny Wootton (Morgan Stanley), and Valentina Ziviani (Insight Investment) as guest presenters.

Ms Saporta welcomed Oliver McCausland (Financial Conduct Authority) and Lisa Danino-Lewis (CLS) as guest attendees; and Naresh Aggarwal (Association of Corporate Treasurers) and Chris Povey (CME) as observers.

Item 2 – March meeting Minutes

The minutes of the 6 March 2024 meeting were approved.

Item 3 – North America accelerated securities settlement cycle update

James Kaye (Chair of the FXJSC Operations Sub-Committee) noted that the Operations Sub-Committee had met on 19 June. The main agenda item had been a discussion on the impact on FX markets of the North American transition to T+1 securities settlement which had been implemented at the end of May 2024.

Mr Kaye noted that industry feedback on the transition had been positive with no significant issues identified. Firms had prepared for the transition in multiple ways, including through increased operating hours. The Committee cited some caution as firms reverted to business-as-usual following increased scrutiny during the transition period. Lisa Danino-Lewis (CLS) noted that there had not been an observable decrease in deals settling in CLSSettlement.

FXJSC members discussed that a transition to T+1 securities settlement in Europe would be more complicated than for the United States given Europe’s multiple markets and currencies.

Item 4 – Market Update

Giles Page and Adam Pickett (Citigroup) presented an update on recent market developments.

Mr Pickett outlined various factors driving FX markets. He noted that the macro picture remained relatively positive, driven by some robust global economic data.

Members discussed the potential impact of the various 2024 elections on the FX market and noted that the United States election would likely be the focus for H2 2024. Members noted that FX volatility broadly remained low in the near term, but some event volatility had been priced in to reflect election uncertainty. Members discussed that some of that uncertainty could persist beyond the elections as government policies unfolded.

Item 5 – Diversity, Equity, & Inclusion (DE&I) representatives meeting update

Jenny Wootton (Morgan Stanley) and Valentina Ziviani (Insight Investment) presented an update on a DE&I representatives’ meeting that took place on 15 May. The meeting was attended by twelve FXJSC member firms’ DE&I representatives across Human Resources and FX business units.

The presenters noted that the meeting was a welcome opportunity to discuss effective DE&I initiatives across firms, and the challenges that could arise.

Key themes that were highlighted during the discussion had included: the need for businesses to articulate a clear DE&I strategy; the importance of having DE&I representatives within FX business units; employees understanding the importance of firms collecting personal data to allow accurate benchmarking and to track progress; and the provision of training to middle management around inclusive leadership.

James Kemp (Financial Markets Standards Board) noted that the Global Foreign Exchange Division (GFXD) Next Step FX event had taken place on 6 June. The event had been aimed at diverse talent interested in exploring career opportunities within the FX market. The event had included a keynote speech from Sian Hurrell (Global Head, Sales & Relationship Management & Head of Global Markets Europe, RBC Capital Markets) and two panel sessions on the evolution and future of the FX market.

Item 6 – Global Foreign Exchange Committee (GFXC) Update and FX Settlement Survey Update

Simon Manwaring (NatWest Markets) gave a brief update on the GFXC’s FX Settlement Risk Working Group.

The Working Group was considering whether the FX Settlement Risk related areas of the FX Global Code (the “Code”) remained fit for purpose, as part of the three-year Code review. Mr Manwaring summarised the Working Group’s proposed changes to the Code, which included adding the risk waterfall approach for managing FX Settlement Risk to Principle 35. The proposed changes were due to be discussed at the Global FX Committee (GFXC) meeting on 1-2 July.

Philippe Lintern (Bank of England) gave a brief overview of the April 2024 FX Settlement Survey. It was noted that the October 2024 survey round would provide a further opportunity for other central banks to adopt the new approach for collecting FX Settlement data ahead of the 2025 BIS Triennial survey.^{footnote [1]}

Item 7 – Market Structure Update – FX Futures & CME FX Link

Jeremy Smart (XTX Markets) and Paul Houston (CME) presented an overview of FX futures trends and the potential impacts on market structure.

Mr Houston outlined the increased participation in FX futures over the past 10 years, mostly driven by asset managers. Additionally, trading had become more established in CME FX Link, a Central Limit Order Book (CLOB) for trading spreads between spot and futures. Although fundamentally a different product to traditional over-the-counter (OTC) spot FX, the futures market had nevertheless become an important source of price discovery and FX risk management.

Mr Smart outlined the potential trade-offs and differences between the CME futures market and traditional FX trading venues. For some participants, the futures market offered an efficient and robust rules-based trading venue, but it was also more complex, traded fewer currency pairs, and many market participants did not have access to the market. At times, primary price formation occurred on CME across several currency pairs, yet in some episodes of market volatility, trading and price formation had resorted to OTC cash platforms.

Members discussed the evolving FX market structure landscape. There was a range of views on the effect of reduced levels of spot activity on OTC primary venues relative to that in the FX futures market. For some participants, the change in location of trading could make price discovery challenging, particularly in times of heightened volatility. To date, the diverse nature of the FX market had been resilient in recent periods of high volatility, and both banks and non-bank market-makers continued to play an important role in the intermediation and provision of liquidity across that fragmented marketplace.

The Committee would continue to monitor this topic and bring it back to a future FXJSC meeting if required.

Item 8 – FXJSC Sub-Committee updates

Sharon Blackman (Chair of the Legal Sub-Committee) noted that the Sub-Committee had met on 18 June. Agenda items had included: an update on Artificial Intelligence (AI) and Financial Services from Latham & Watkins, which provided an overview of UK AI regulation and a discussion on the global divergence in regulatory approaches; a view from Jonathan Ashley-Norman KC, Three Raymon Buildings Barristers on the Post-Office Inquiry; and a discussion on ethics in the legal profession.

Item 9 – Regular updates

James Kemp (FICC Markets Standards Board) noted that the Financial Markets Standards Board (FMSB) continued to draft the pre-hedging Spotlight Review. Based on the outcome of the drafting process, the goal was to release the review to inform the IOSCO consultation expected later in 2024.

Attendees

Galina Dimitrova – The Investment Association

Giles Page – Citigroup

James Kaye (Chair, FXJSC Operations Sub-committee) – HSBC

James Kemp – FICC Markets Standards Board

Jeremy Smart – XTX Markets

Kate Hill – Aviva Investors

Kevin Kimmel – Citadel Securities

Lisa Dukes – Corporate Representative - Association of Corporate Treasurers

Mani Natarajan – Morgan Stanley

Neehal Shah – BNP Paribas

Nina Moylett – M&G plc

Paul Houston – CME Group

Philippe Lintern – Bank of England

Rajesh Venkataramani – Goldman Sachs

Richard Purssell – Insight Investment

Sally Francis-Cole – London Stock Exchange Group

Sarah Boyce – Association of Corporate Treasurers

Sarah Collins – UBS Asset Management

Sharon Blackman (Chair, FXJSC Legal Sub-committee) – Citigroup

Simon Manwaring – NatWest Markets

Sophie Rutherford – State Street

Stephen Jefferies – JP Morgan

Vicky Saporta (Chair) – Bank of England

FXJSC Secretariat

James O’Connor – Bank of England

Joseph Hanrahan – Bank of England

Laura Austin – Bank of England

Sakshi Gupta (Legal Secretariat) – Bank of England

Guest attendees

Adam Pickett - Citigroup

Chris Povey – CME

Jenny Wootton – Morgan Stanley

Lisa Danino-Lewis – CLS

Naresh Aggarwal – Association of Corporate Treasurers

Oliver McCausland – Financial Conduct Authority

Valentina Ziviani – Insight Investment

Apologies

Alan Barnes – Financial Conduct Authority

Marc Bayle de Jesse – CLS

Mimi Rushton - Barclays

Richard Bibbey - HSBC