in the code into two parts. the first phase covers areas such as ethics, information sharing, execution ( including mark - up ) and confirmation and settlement. the second phase will cover topics such as governance, risk management and compliance, as well as further aspects of execution including e - trading and platforms ( including last look ), prime brokerage, and the unique features of fx swap, forward, and option transactions. the first phase of the code has been completed and is set to be released next week on 26 may in new york following the meeting of the global foreign exchange committees. i would hope that you, as participants in the fx market in china, find the code useful, readable and relevant to the functioning of the market here. work on the second phase of the code is already underway. our intention is that the complete code will be released following the global foreign exchange committees meeting in london in may 2017. at the end of that process, for the code to be effective and for it to achieve what we want it to achieve, it will need to be accepted and endorsed by market participants. while the code is a voluntary code, to ensure greater adherence to the code, we will also be outlining some steps we are taking in that regard next week in new york and will have a fuller suite of adherence mechanisms in london next year. finally, let me turn to discussing some of the challenges that australia faced as the australian dollar became an internationalised currency. the australian dollar was floated in 1983, as large net capital inflows ( in part resulting from the relaxation of capital controls in the 1970s ) made it difficult to control both the exchange rate and domestic monetary conditions. at the same time, most of the remaining capital controls were removed as these were only seen as a tool for maintaining the fixed exchange rate, and hence were no longer necessary. bis ( bank for international settlements ) ( 2015 ), ‘ economic consultative committee statement on fx market best practices ’, media release, 11 may. available at http : / / www. bis. org / press / p150511. htm. bis ( bank for international settlements ) ( 2016 ), ‘ foreign exchange working group ’, media release, 10 february. available at http : / / www. bis. org / about / factmktc / fxwg. htm. bis central bankers ’ speeches in the decade prior to moving to a freely floating currency in 1983, australia had been through almost all other forms of

exchange rate regimes : a peg to the us dollar ( as part of the bretton woods exchange rate regime ) ; a peg to a trade - weighted basket ; and an adjustable peg, where the frequency of adjustment increased substantially up until the time of the float. both capital inflows and outflows increased substantially following the float in 1983 ( graph 1 ). the benefits of the floating exchange rate in assisting the australian economy to respond to shocks are documented extensively elsewhere, as are the benefits in allowing greater independence of domestic monetary policy settings. 5 one clear demonstration of this is in the reduced volatility of domestic interest rates and the increased volatility of the australian dollar ( graph 2 ). but the increased volatility of the australian dollar is generally regarded as a positive development ( as a mechanism of adjusting to shocks ) and not a threat. graph 1 g stevens ( 2013 ), ‘ the australian dollar : thirty years of floating ’, speech at the australian business economists ’ annual dinner, sydney, 21 november ; ballantyne a, j hambur, i roberts and m wright ( 2014 ), ‘ financial reform in australia and china ’, rba research discussion paper 2014 – 10. bis central bankers ’ speeches graph 2 the increase in gross capital flows encouraged the development of domestic fx and hedging markets, to the point where, as i mentioned earlier, the australian dollar is now one of the world ’ s most traded currencies, including a large swaps market. australian corporates ( particularly financial institutions ) regularly issue debt in foreign currency, which is then swapped into australian dollars. an active ‘ kangaroo ’ market ( australian dollar - denominated bonds issued by non - residents ) provides natural counterparties to these swaps. deep hedging markets allow australian firms to hedge foreign currency risk relatively cheaply. this is important because australia ’ s history of current account deficits means that it has accumulated a fairly large net foreign liability position. in the absence of hedging, this could be problematic were the australian dollar to depreciate significantly. but after taking hedging into account, australia has a positive net foreign currency asset position. 6 the existence of deep hedging markets further ensures that the benefits of a flexible exchange rate policy outweigh the costs. however, this process was not smooth. in the 1980s and early 1990s australia experienced two painful episodes, one relating to residents undertaking unhedged foreign currency rush a, d sadeg