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 >Standard on the use of Term SONIA reference rates Transparency Draft
It is expected by the UK Authorities and the Working Group on Sterling Risk-Free Reference Rates that the use of Term SONIA will be relatively limited. However, both regulators and market participants expect that Term SONIA will be sufficiently robust for selected applications where the use of a rate that is compounded in arrears is not appropriate or operationally achievable.
The Standard has been developed with the aim of identifying where there may be robust rationales for the use of Term SONIA for transactions in the loan, bond and derivatives markets and to set out certain expected behaviours of markets participants when using or issuing Term SONIA products in light of the reduced systemic risks associated with overnight risk free rates.
The eight Core Principles of the Standard identify selected use cases where there may be robust rationales for using Term SONIA and set out certain expected behaviours of market participants.
FMSB members and other interested parties are invited to comment on the proposed Standard. This consultation will run until 28 May 2021 with the final document expected to be published shortly thereafter.
Standard for the execution of Large Trades in FICC markets Transparency Draft
This Standard sets out expected behaviours for participants in the secondary FICC markets in relation to the execution of Large Trades. The Standard focuses on Large Trades due to the heightened conduct risks associated with their execution and the greater potential market impact of such activity compared with smaller transactions.
The Standard adopts a subjective definition of Large Trades, acknowledging that what constitutes a Large Trade will vary by markets, product, time period, geography and other factors that could impact liquidity. The Standard sets out ten Core Principles that are applicable to the execution of all Large Trades between dealers and clients, and distinguishes between obligations applicable to market participants who act as either an agent or a principal when executing Large Trades.
FMSB members and other interested parties are invited to comment on the proposed Standard. This consultation will run until 16 March 2021 with the final document expected to be published shortly thereafter.
Standard for the sharing of investor allocation information in the fixed income primary markets Transparency Draft
This Standard sets out certain expected behaviours of syndicate banks relating to the sharing of investor allocation information for new issuances in fixed income primary markets on the day of pricing within their institutions. The Core Principles seek to promote consistent baseline industry practices and provide both issuers and investors with certain protections and controls as to how their allocation information is used.
FMSB members and other interested parties are invited to comment on the proposed Standard. This consultation will run until 16 March 2021 with the final document expected to be published shortly thereafter.
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.
Statement of Good Practice for Participation in Sovereign and Supranational Auctions in Fixed Income Markets
A common way for government or supranational bonds to be issued is through a publicly announced auction. Auctions involve multiple parties/participants including Issuers (debt management offices/agencies/treasuries), Primary Dealers, Dealers and Investors. This Statement of Good Practice (SoGP) describes the way in which sovereign and supranational auctions are typically conducted in […]
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.
Measuring execution quality in FICC markets
Measuring and evidencing trade execution quality has become critical to client servicing as well as to demonstrating ongoing compliance with investor protection regulations. A firm’s ability to do this well depends heavily on the quality of data available.
While the various regulatory requirements for measuring execution quality vary by jurisdiction and asset class, wholesale fixed income, currencies and commodities (FICC) markets face specific challenges in achieving high standards of transparency, openness and fairness.
This Review examines the following topics:
- the observability of relevant data sources;
- the reliability and quality of data sources;
- variations in data observability and reliability across different products;
- obligations and priorities in measuring execution quality; and
- a role for industry standards.
This Spotlight Review is intended to benefit front office trade execution on the buy-side as well as within market makers, and those responsible for overseeing regulatory requirements in compliance and risk functions.
FMSB also issued a press release.
7 September 2020
Monitoring FICC markets and the impact of machine learning
Market surveillance in FICC has undergone, and continues to undergo, significant change as a result of regulation, the evolution of market structure, and technological developments. This Spotlight Review considers these structural and technological changes, in particular the emergence of machine learning trading strategies, and sets out some of the challenges associated with these developments for surveillance teams in FICC markets. The review then examines the role of technology as a potential solution to these challenges, creating as it does opportunities to improve market surveillance through the application of machine learning.
This review outlines:
- factors driving the pace of change in market surveillance;
- the acute impact of data on surveillance effectiveness;
- surveillance of complex algorithms and machine learning;
- employing machine learning to empower surveillance; and
- the vital role agility plays in effective surveillance.
FMSB also issued a press release.
3 August 2020
Examining remote working risks in FICC markets
Following COVID-19 being declared a global pandemic and the closure of many offices, FMSB formed a working group of members and other interested market participants to consider the impacts of financial services activities being undertaken by a workforce which is widely distributed and using remote working.
The working group set about identifying and capturing the main priorities from a wide range of risks that arise from the new working environment, with a focus on areas which impact the fairness and effectiveness of wholesale FICC markets, and then to consider mitigants or strategies to manage these risks.
This Spotlight Review includes a risk register that outlines over 40 risks drawn from the experience and observations of the working group for market practitioners to use when conducting their own risk assessments.
The risk register is available at fmsb.com/wp-content/uploads/2020/07/risk-register-examining-remote-working-risks-in-ficc-markets.xlsx
FMSB also issued a press release.
27 July 2020
LIBOR transition: Case studies for navigating conduct risk
The FMSB Spotlight Review ‘LIBOR transition: Case studies for navigating conduct risks’ includes good practice observations and practical case studies to support firms when considering the risks to fairness and effectiveness as the market moves to risk-free rates as more sustainable and representative benchmarks.
FMSB also issued a press release.
11 June 2020
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.
11 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.
23 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.
27 July 2018
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.
27 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.
27 July 2018
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.
Information about each of FMSB’s active groups is set out below with an update as at 24 March 2021. For an overview of all activity please see our ‘Progress on a Page’.
Behavioural Conduct Analysis (BCA) Committee
Chair: David Flowerday, EMEA Head of FICC Compliance at Citigroup Global Markets Limited
The BCA Committee was reconvened in April 2020 to produce a second edition of FMSB’s seminal Behavioural Cluster Analysis, published in July 2018. The primary aims of the second edition are to bridge the gap between the analysis for the 2018 publication and to include new misconduct cases, and to incorporate feedback on the use and engagement with the BCA from practitioners and other users. The group is progressing its analysis of cases, and drafting text with the ambition to publish an updated document in 2021.
Conduct and E-Commerce Working Group
Chair – Chris Dickens, COO EMEA Markets, HSBC
See below – Algorithmic Governance Working Group under the ETTC.
Conduct and Ethics Sub-Committee
Chair: Tracey McDermott, Group Head of Corporate Affairs, Brand & Marketing, Conduct, Financial Crime and Compliance at Standard Chartered
The Sub-Committee, together with the Remote Working Risks and Controls Working Group is focusing on the role of controls, competency and culture in driving good conduct outcomes in FICC markets. Work has commenced work on a publication on how existing risk management frameworks should be adapted in order to efficiently monitor and manage new and evolving risks deriving from remote and/or hybrid working in a post pandemic environment.
The Sub-Committee is also considering the potential role, if any, FMSB can play in developing conduct training and qualifications. This will be reviewed further in 2021.
Electronic Trading and Technology Committee (“ETTC”)
Co-Chairs:
Zar Amrolia, Co-CEO, XTX Markets
Ciara Quinlan, Head of Electronic Principal Trading FX, Rates & Credit, UBS and FMSB Standards Board Member
The ETTC has been addressing two topics in separate Working Groups covering Trading Platforms and Algorithmic Trading – Governance and Conduct.
Trading Platforms Working Group – The Working Group is preparing a Statement of Good Practice aimed at promoting greater transparency as to how both bilateral and multilateral electronic trading platforms operate and seeking to harmonise the disclosures made by all trading platforms to their participants or prospective participants across FICC markets and asset classes. Increased transparency and standardisation of disclosures should in turn help minimise disputes between trading platform operators and their participants.
Algorithmic Governance Working Group – Following a review of the substantial body of international regulatory developments since The Algorithmic trading in FICC markets: Statement of Good Practice for FICC market participants was started, the decision has been made to retire this publication due to the conclusion that the original purpose of the paper is now satisfied instead by regulatory guidance. The Transparency Draft published in June 2020 will not therefore progress to final publication.
The ETTC will now look to focus on other topics in the electronic trading arena, where regulatory guidance does not yet exist.
Energy Working Group
Chair: TBC
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. Consideration is being given to a workstream considering issues associated with block trades as well as carbon credits.
LIBOR Transition Working Group
Chair: Chris Salmon, Global Chief Control Officer of Markets, HSBC and FMSB Standards Board Member
In Q4 2019, FMSB set up an LIBOR Transition Working Group to consider the conduct risks arising from the transition from LIBOR to near risk-free rates for FICC market participants and how participants may seek to manage these conduct risks.
On 11 June 2020 the Working Group published the Spotlight Review ‘LIBOR transition: Case studies for navigating conduct risk’ which includes good practice observations and practical case studies to support firms when considering the risks to fairness and effectiveness as the market moves to risk-free rates as more sustainable and representative benchmarks. The next phase of work focusing on issues related to the transition of back books commenced in early October. The Working Group is currently working towards the publication of a number of case studies by the end of Q1 2021.
Large Trades Working Group
Chair – Michael Dawson, Head of Liquidity & FX, Royal Dutch Shell
The Large Trades Working Group has developed an FMSB Standard for market participants in connection with the execution of large trades for wholesale FICC markets. The Standard for the execution of Large Trades in FICC markets, which was published as a Transparency Draft on 15 December 2020, 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. Comments on the Transparency Draft are invited until 16 March 2021.
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 be used to identify the issues the Working Group will examine. The Working Group has commenced the development of a Spotlight Review focusing on where and how existing practices could give rise to issues challenging the fair and effective operation of the precious metals market and how to address these challenges, and has also commenced work on a Standard relating to the provision of liquidity at LBMA auctions.
Rates Sub – Committee
Chair – Charles Bristow, Global Head of Rates Trading, J.P. Morgan and Member of the FMSB Standards Board Member
The Rates Sub-Committee is considering topics and prioritisation of its future work.
Remote Working Risks and Controls Group
Chair – Rosie Murphy Williams (independent)
The group was set up in response to the impact of the COVID-19 pandemic on the operation of financial services activities and the consequent widespread use of remote working. FMSB harnessed the diversity of its member firms and other interested parties to pool experiences and share observations of risk.
Since the publication in July 2020, of a Spotlight Review on ‘Examining remote working risks in FICC markets’ which seeks to identify and capture the risks that arise from the widespread and prolonged period of remote working, the Working Group together with the Conduct & Ethics Sub-Committee, has commenced work on a publication on how existing risk management frameworks should be adapted in order to efficiently monitor and manage new and evolving risks deriving from remote and/or hybrid working in a post pandemic environment.
Spreads Sub-Committee
Chair – Jonathan Brown, Head of Lending and Portfolio Management, EMEA, Barclays
The Spreads Sub-Committee has developed a Standard dealing with the sharing of investor allocation information. This Standard for the sharing on investor allocation information in the fixed income primary markets, which was published as a Transparency Draft on 15 December 2020, seeks to provide a consistent industry baseline standard for the sharing of investor allocation information with secondary market desks on the day of a new primary issuance and to provide both issuers and investors with certain protections and controls as to how their allocation information is used. Comments on the Transparency Draft are invited until 16 March 2021.
Term Rate Working Group
Chair – Serge Gwynne, Partner, Oliver Wyman
The Term Rate Working Group was set up in mid-November 2020 and is developing a Standard, building on the Sterling RFR Working Group use cases publication, which describes the circumstances in which it may be more or less appropriate to use Term SONIA for transactions in the loan, bond and derivatives markets and sets out certain expected behaviours of markets participants when using or issuing Term SONIA products, with a view to publishing by the end of Q1 2021.
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.
