guy debelle : the global foreign exchange committee and the fx global code speech by mr guy debelle, deputy governor of the reserve bank of australia, at the fx week australia webinar, virtual, 22 october 2020. * * * thank you to fx week for organising this event. today, i will provide you with an update on the recent issues that the global foreign exchange committee ( gfxc ) has been considering as well as the state of play in the review of the fx global code. conditions in foreign exchange markets the gfxc has met three times this year and each meeting we draw on the insights of fx market functioning from the 20 member foreign exchange committees. 1 this encompasses advanced and emerging economy fx markets and views from all parts of the market : sell - side, buy - side, non - banks and platforms. in fx markets, the experience following the outbreak of covid - 19 earlier this year was similar to what has occurred in previous market crises : spreads widened, volatility increased sharply, liquidity deteriorated for both spot and swap markets and funding costs surged in many currencies. these abrupt changes in market conditions can prompt rapid shifts in the structure of the market, such as the methods by which market participants execute their trades. for example, there was a reduction in the share of trade internalisation used by sell - side market participants and a greater share of activity migrated to the primary venues. however, one notable feature of this latest crisis was both how sharply market conditions deteriorated and how quickly they recovered. the actions by central banks and governments around the globe doubtless contributed to this rebound. by and large, conditions have continued to improve in recent months. many indicators of liquidity are now approaching more normal levels, although the depth of market does remain noticeably below pre - pandemic levels. conditions are more diverse in emerging market currencies, where more idiosyncratic factors tend to be in play, but overall, conditions have also generally improved in these markets but to a lesser extent. in periods of volatility, it is inevitable that there will be a greater focus on benchmark fixes. large changes in asset prices and currencies generally mean that investors have greater - than - normal rebalancing flows when managing their portfolios. this was certainly the case at the height of market volatility in march. ordinarily, a lot of these rebalancing flows will go through the market at times that match

and sophisticated an institution ’ s fx activities are, that institution should have undertaken a more comprehensive and detailed internal exercise to ensure its adherence to the code ’ s principles. the gfxc will develop additional guidance to assist firms in identifying those principles of the code that are the most appropriate for them to evaluate when aligning their practices with the code. this will complement the existing material that is already available on the gfxc ’ s website, including case studies of a variety of buy - side firms that have aligned their practices to the code. 4 another priority for the code review is to provide further guidance around certain trading practices, in particular last look and pre - hedging. it is not necessarily the case that the gfxc will amend the existing principles of the code dealing with these practices. this may happen, but we are certainly aiming to provide guidance material that provides greater clarity about how these practices are used and what the relevant considerations are for market participants. there will always be some controversy attached to these practices, so it is important that they are transparent and well understood. one important means for providing transparency in the fx market is the disclosures made by sell - side participants. in the gfxc ’ s surveys of the industry, many market participants – especially from the buy - side – still consider the disclosures around certain trading practices to be poor. and it is the areas of pre - hedging and last look that are generally of most concern. more broadly, the aim of the gfxc has been to ensure that market participants have easily accessible and understandable information on how their trades are handled, allowing them to make informed decisions. while there has been progress in this area, the committee ’ s view is that the availability and adequacy of some elements of disclosures remains an issue. the disclosures have to be readable and have meaningful content. in part, it can be the greater volume of disclosure information that is being made available is itself proving challenging for market participants to comprehend and evaluate. several different sets of disclosures can be produced by the one entity, with some publically available and others provided bilaterally, depending on the intended purpose of the material. across counterparties, disclosure information is often provided in an inconsistent manner with varied levels of detail. disclosure documents are also reviewed and updated at different times by different counterparties, and there is no central repository of multiple firms ’ disclosures. the gfxc is aiming