8  The current version of TMPG’s Best Practices for Treasury, Agency Debt, and Agency Mortgage-Backed Securities Markets is available here. 9  Such documentation includes, but is not limited to, FX master agreements, FX non-deliverable transaction documents, and FX master give-up agreements. BIS central bankers’ speeches  3  participants contribute their expertise and have a sense of ownership in the process. By integrating best practices within their own institutions, private-sector participants support market adoption. 10 Central banks – with their public orientation and interest in the integrity and effectiveness of markets – can further encourage broad adoption of best practices. 11 Third, central bank support can also help broaden the composition of those engaged in designing best practices. The New York Fed strives to have all important segments of the market represented in the membership composition of the groups it sponsors. For example, the TMPG recently added individuals who have experience at a regional broker dealer and a high-frequency trading firm to broaden the views and perspectives on the committee. FXC membership has also evolved significantly since the group’s inception. Both committees include institutions from the sell-side, buy-side, as well as infrastructure providers, such as trading venues. Central banks, and their counterparts, also encourage international collaboration. Such collaboration has increased over time and has reached a significant milestone through the work to develop an FX Global Code. This work spans sixteen different central banks, covering major financial centers in advanced and emerging market economies, and it includes a set of private-sector market participants.

Implementing them requires compliance functions to be thoughtful in determining how to identify large long or short positions, given the uncertainty of tradable float. It also challenges staff to consider which trading strategies may have adverse implications for market liquidity and whether they warrant policies around them. Further, the TMPG’s best practices note that responsibility for establishing and maintaining a rigorous internal control environment within an organization rests with its senior management. Neither best practices nor laws nor regulations can guarantee a lack of bad behavior. Recent failures illustrate the adverse consequences that behavioral weaknesses can have for those who rely on financial services. It also underscores the importance of adopting a culture that creates an environment in which laws, regulations, and best practices are valued and upheld. To that end, regulators and supervisors in various jurisdictions have heightened their focus on firms’ corporate governance programs and emphasized the need for instilling values that promote proper behavior and sound decision-making throughout the firms. For example, the New York Fed has been working to advance industry driven culture reform in the financial services industry over the past few years. 19 We are joined by other official institutions and groups across the globe, such as the Group of 30 and the Basel Committee, in pushing for heightened standards of market practice and behavior. 20 Promoting adoption of best practices Ideally, best practice standards should become an integral part of the market, observed consistently and transparently by participants across various segments.