Work In Progress

Standards, Statements of Good Practice, and other approved publications are produced by FMSB’s cross-sectoral committees, sub-committees and working groups, each of which follows a rigorous production, review and transparency process.

Work in Progress

Standards, Statements of Good Practice, and other approved publications are produced by FMSB's cross-sectoral committees, sub-committees, and working groups, each of which follows a rigorous production, review and transparency process.

Rates Sub – Committee

Chair – Charles Bristow, JP 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. Comments on the Transparency Draft are requested by Monday 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 – Phil Llewellyn, 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 has been working 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 Trading under the ETTC.

Large Trades Working Group

Chair – Michael Dawson, Royal Dutch Shell

The Large Trades Working Group is developing a 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 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 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 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 Working Group is aiming to publish the first scenarios in Q2 this year.

Emerging Vulnerabilities Working Group

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, Data and Technology

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.