Our outputs are Standards, Statements of Good Practice, and Spotlight Reviews developed by our membership and designed to illustrate best practice in areas of uncertainty to all market participants. Transparency Drafts are published for comment before the document is finalised.
Transparency Drafts
All Standards and some Statements of Good Practice are published for feedback as Transparency Drafts. FMSB seeks comment on Transparency Drafts. Please click on the link below or email comments to secretariat@fmsb.com.
Email Us >Statement of Good Practice for Participation in Sovereign and Supranational Auctions in Fixed Income Markets Transparency Draft
FMSB’s Statement of Good Practice for Participation in Sovereign and Supranational Auctions in Fixed Income Markets Transparency Draft (SGP) describes the way in which sovereign and supranational auctions are typically conducted in Europe, the roles Market Participants in those auctions play, the types of auction structure, orders and transaction types that are often utilised, and the different conflicts of interest that can arise for such Market Participants.
The comments period closed on Monday 27 January 2020.
Algorithmic Trading In FICC Markets Statement of Good Practice Transparency Draft
The FMSB Transparency Draft of the Algorithmic Trading In FICC Markets Statement of Good Practice sets out a number of Good Practice Statements in relation to the use of Algorithms by FMSB member firms in their FICC business activities.
The comments period for this Transparency Draft closed on 7 September 2018. Since then, the FMSB Standards Board has identified a synergy between this paper and other FMSB work on algorithmic trading so we are bringing it together for publication in one document. We will update this page in due course.
Standards
FMSB Standards are intended to reduce the continuing uncertainty about acceptable practice in opaque and unregulated areas, which is a hazard for FMSB members (and other market participants). FMSB members are expected to adopt FMSB Standards in their businesses (where relevant) and to evidence this through an annual Statement of Commitment – see Adherence for more information.
Secondary Market Trading Error Compensation Standard
This Standard sets out expected behaviours that are designed to improve the practice regarding the payment of compensation for trading errors.
Risk Management Transactions for New Issuance Standard
The Risk Management Transactions for New Issuance Standard sets out expected behaviours that are designed to improve the practice and awareness regarding risk management activity that is conducted in and around the new issuance of bonds.
These improvements should enhance the fairness and effectiveness of the process for all market participants.
New Issue Process Standard for the Fixed Income markets
This Standard sets out enhancements to existing practices that are designed to improve the new issue process continuum (from the granting of a mandate to the publication of statistics), which improvements should enhance the fairness and effectiveness of the process for all participants, including issuers, investors and lead managers.
Binary Options for the Commodities Markets_Updated
The Binary Options standard for the Commodities markets Standard aims to describe the characteristics of a type of transaction which is used by participants in the Commodities markets and to set out certain expected behaviours of wholesale market participants that enter into them.
Reference Price Transactions for the Fixed Income Markets – Updated
This Standard aims to describe the characteristics of a Reference Price Transaction (“RPT”) and to set out certain expected behaviours of wholesale market participants that enter into them.
Statements of Good Practice
Statements of Good Practice reflect FMSB’s view of what constitutes good or best practice in the areas covered by the Statement of Good Practice in question. FMSB members are expected, and other firms are invited, to consider their own practices in light of relevant Statements of Good Practice and make any changes to such practices that they deem to be appropriate.
Conflicts of Interest Statement of Good Practice
This Statement of Good Practice aims to provide practical, working level guidance and examples for market participants to draw on, as they consider ways to prevent, manage and mitigate conflicts of interest that arise within their firms.
Conflicts of interest may arise between (i) clients; (ii) a firm and its client(s); and (iii) employees and a firm/client(s). These conflicts have the potential to be detrimental, not only to the firms involved, but to clients and the financial markets more generally. Dealing with them effectively is one way in which instances of this kind of market misconduct can be minimised.
Conduct Risk in Market Transactions Statement of Good Practice for FICC Market participants
The Conduct Risk in Market Transactions Statement of Good Practice for FICC Market participants sets out Good Practice Statements for the identification of conduct risks in market transactions using this methodology. The identification of conduct risk is an important role undertaken by the Front Office, as well as by control and oversight functions, and firms should consider their own practices in light of this Statement of Good Practice and make any changes to such practices as they deem appropriate.
Suspicious Transaction and Order Reporting Statement of Good Practice for FICC Market Participants
Suspicious Transaction and Order Reporting Statement of Good Practice for FICC Market Participants covers the identification of suspicious orders and transactions and their reporting to relevant regulators (the FCA in the case of the UK). Many of the practices described relating to the identification and investigation of suspicious activity will be relevant to many jurisdictions.
Monitoring of written electronic communications Statement of Good Practice for FICC Market Participants
The Monitoring of written electronic communications Statement of Good Practice for FICC Market Participants is designed to be relevant to all front-office and control or support function personnel who are active participants in the FICC markets and to those who are engaged in the monitoring and surveillance of those activities.
Front Office Supervision Statement of Good Practice for FICC Market Participants
The Front Office Supervision Statement of Good Practice outlines good practice for the Supervision of front office activities that may directly affect the functioning of FICC markets and/or conduct with market participants.
Conduct Training
This Statement of Good Practice sets out a number of Core Principles relevant to conduct training, together with good practices that are currently used in Member Firms to achieve the outcomes specified in these Core Principles.
Surveillance in Foreign Exchange Markets
Set out in this document are a set of core principles for surveillance that firms may wish to adopt in order to identify, determine and establish an effective surveillance function.
Spotlight Reviews
Spotlight Reviews encompass a broad range of publications used by FMSB to illuminate important emerging issues in FICC markets. Drawing on the insight of members and industry experts, they provide a way for FMSB to surface challenges market participants face and may inform topics for future work. Spotlight Reviews will often include references to existing law, regulation and business practices. However, they do not set or define any new precedents or standards of business practice applicable to market participants.
The critical role of data management in the financial system
The FMSB Spotlight Review ‘The critical role of data management in the financial system’ examines the crucial role of data management in the stability and resilience of wholesale FICC markets and financial systems.
FMSB also issued a press release.
11th May 2020
Emerging themes and challenges in algorithmic trading and machine learning
The FMSB Spotlight Review ‘Emerging themes and challenges in algorithmic trading and machine learning’ highlights important emerging issues in this area to assist market participants in considering how to address challenges that may arise.
FMSB also issued a press release.
23rd April 2020
FMSB Behavioural Cluster Analysis – Misconduct Patterns in Financial Markets
FMSB BCA research includes the analysis document and selected case studies as well as the BCA database of misconduct cases.
Misconduct Patterns in Financial Markets – Selected Case Studies
FMSB BCA research includes the analysis document and selected case studies as well as the BCA database of misconduct cases.
27th July 2018
Market Abuse and Manipulation – Database of Cases
FMSB BCA research includes the analysis document and selected case studies as well as the BCA database of misconduct cases.
Work In Progress
Standards, Statements of Good Practice and Spotlight Reviews are produced by FMSB’s cross-sectoral committees, sub-committees and working groups, each of which follows a rigorous production, review and transparency process. See our Organisational structure for more information about these groups, and Committees, Sub-Committees and Working Groups for information about the Chairs.
Rates Sub – Committee
Chair – Charles Bristow, J.P. Morgan and FMSB Standards Board Member
On 2 December 2019 the Rates Sub-Committee published a Statement of Good Practice for Participation in Sovereign and Supranational Auctions in Fixed Income Markets Transparency Draft. It describes the way in which sovereign and supranational auctions are typically conducted in Europe, the roles participants in those auctions play, the types of auction structure, orders and transaction types that are often utilised, and the different conflicts of interest that can arise for such participants. It includes Good Practice Statements relating to the management of those conflicts and certain other matters relevant to the conduct of participants in and around such auctions. The comments period for this Transparency Draft closed on 27 January 2020.
The Rates Sub-Committee is undertaking an exercise to identify its next focus for agreement with the Standards Board.
Spreads Sub-Committee
Chair – Jonathan Brown, Barclays
The Spreads Sub-Committee is currently working on a Standard in relation to the sharing of new issue information. It will set out the practice of sharing primary issuance allocation information, the rationale for doing so, and improvements to enhance the fairness and effectiveness of the market while maintaining confidentiality.
Metals Working Group
Chair – David Tait, CEO of World Gold Council and Independent Member of the FMSB Standards Board
This Working Group was set up to review the fairness and effectiveness of business practices in the wholesale metals trading markets. Its initial focus is on precious metals markets. The Working Group has identified nine market features, which have been arranged into three themes: i) transparency and price formation; ii) post-trade effectiveness; and iii) market practices. These will now be used to identify the issues the Working Group will examine this year for agreement with the Standards Board, together with a proposed approach, and workplan.
It is anticipated that the Metals Working Group will turn its attention to the base metals market in due course.
Energy Working Group
Chair – Jonathan Hill, BP
The Energy Working Group was set up to review the fairness and effectiveness of business practices in the wholesale energy markets. An independent review of existing market practices has been undertaken to refine the workplan for the Working Group, which will be presented to the Standards Board for agreement this year.
Electronic Trading and Technology Committee (“ETTC”)
Co-Chairs – Zar Amrolia, XTX Markets and FMSB Advisory Council Member and FMSB Standards Board Member, and Ciara Quinlan, UBS and FMSB Standards Board Member
The ETTC is addressing two topics in separate Working Groups covering Trading Platforms and Algorithmic Trading – Governance and Conduct.
Trading Platforms Working Group – The Working Group has been preparing a Statement of Good Practice aimed at describing the best practice standards and disclosures that trading platforms should make available to their participants and prospective participants, so that all parties are clear as to how the platform operates, and the obligations they are subject to in order to minimise disputes.
Algorithmic Governance Working Group The use of computer algorithms to facilitate trading in FICC markets has significantly increased in recent years, as has the potential for this activity to adversely impact market and firm stability and harm market participants. In 2018, the Algorithmic Governance Working Group published Algorithmic Trading in FICC Markets Statement of Good Practice as a Transparency Draft. The Conduct and E-Commerce Working Group worked on a Statement of Good Practice to provide guidance on how algorithms should be documented, managed, implemented and tested, as well as identifying and managing conduct risks relating to the use of algorithms. The Standards Board recognised the synergy that could be exploited, and the two working groups joined to bring together their work on algorithmic trading. A combined Statement of Good Practice is planned for publication this year.
Conduct and E-Commerce Working Group
Chair – Chris Dickens, HSBC
See above – Algorithmic Governance Working Group under the ETTC.
Large Trades Working Group
Chair – Michael Dawson, Royal Dutch Shell
The Large Trades Working Group is developing an FMSB Standard for market participants in connection with the execution of outsize orders (‘large trades’) for wholesale FICC markets. The Standard, when final, will be a valuable source of information for market participants, including clients, when executing large trades. Topics that will be addressed include disclosure, pre-hedging, agency and principal dealing, and buy-side obligations.
IBOR Transition Working Group
Chair – Chris Salmon, HSBC and FMSB Standards Board Member
In Q4 2019, the Standards Board decided that there was merit in FMSB setting up an IBOR Transition Working Group to consider the conduct risks arising from the transition from IBOR to near risk-free rates for FICC market participants and how participants may seek to manage these conduct risks.
The IBOR Transition Working Group first met in January 2020 to discuss the key conduct risks that firms from a cross-section of the market including sell-side, buy-side and corporates face as a result of the transition. It is currently proposed that the Working Group will produce a series of scenarios to illustrate where such risks may arise and provide observations as to how these risks could be managed to promote fair and effective markets during the transition. The Group is aiming to publish the first scenarios in Q2 of this year.
Emerging Vulnerabilities
A review of emerging vulnerabilities in respect of current and projected future wholesale FICC market pre-trade, trading and post-trade activities, which may impact the fairness and effectiveness of markets for market participants, is in progress. The work to date has identified key trends impacting the market including the macroeconomic environment, changes in products and the marketplace, a changing supply-side structure, and changes in demand. The analysis has been shared with Working Group Chairs to gather feedback and any additional input. The output of this review will inform the prioritisation of areas for our medium-term workplan.
Market Structure
The increasing importance of data emerged as a topic for which FMSB should set out the issues, preliminary to deciding what Standards or other guidance would be helpful for market participants. We are aiming to issue a series of publications in the first half of this year.
How does a typical Standard or Statement of Good Practice progress to publication?
Annual Report
The FMSB Annual Report is published annually and sets out progress made by FMSB to enhance standards of behaviour in the wholesale fixed income, currencies and commodities (FICC) markets.
FMSB Annual Report 2019
The FMSB Annual Report 2019, published on 25 February 2020, sets out our progress and key activities in 2019, and an outline of our work for 2020.
FMSB Annual Report 2018
The FMSB Annual Report 2018, published on 18 March 2019, sets out further progress made to enhance standards of behaviour in the wholesale Fixed Income, Currencies and Commodities (“FICC”) markets in the period from 1 August 2017 to 31 December 2018.
FMSB Annual Report 2017
The FMSB Annual Report 2017, published on 20 September 2017, sets out progress made to enhance standards of behaviour in the wholesale Fixed Income, Currencies and Commodities (“FICC”) markets in the period from 1 August 2016 to 31 July 2017.
Last updated 5 June 2020
