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The Australian Securities & Investments Commission (ASIC) and the Securities and Futures Commission (SFC) today issued a joint circular highlighting observations from their collaborative reviews of FX activities conducted by global financial groups in their respective jurisdictions. The reviews focused on the participants’ (Note 1) internal controls and compliance with the applicable rules and regulations, as well as their adoption of the relevant industry guidelines (eg, the FX Global Code) (Note 2). Details about the regulators’ observations and good industry practices are provided in the circular and its annexes.
Hong Kong, as a premier international financial centre, is one of the most important FX trading centres globally and in the Asia-Pacific region. The Hong Kong dollar has been amongst the top 10 currencies in global rankings in terms of turnover (Note 3). Therefore, a major regulatory focus for the SFC is to ensure that licensed corporations, as participants in the FX market, act with fairness and in the best interests of clients as well as the integrity of the market.
“In view of the important roles both Australia and Hong Kong as well as the global financial groups play in the FX market in the Asia-Pacific region, the ASIC and the SFC initiated these thematic reviews over the past few years as part of our collaborative efforts to stay abreast of the increasing complexity of regulating the FX market across jurisdictions,” said Ms Julia Leung, the SFC’s Deputy Chief Executive Officer and Executive Director of Intermediaries. “Licensed corporations which are participants in the FX market should put in place robust governance, risk and control frameworks to effectively manage the risks brought about by their FX activities.”
Licensed corporations carrying out FX activities should review and consider how the observations and good industry practices set out in the SFC’s circular and its annex can be implemented to enhance their supervision, risk management and internal controls, and ensure compliance with the rules, regulations and industry guidelines.
Notes:
- “Participants” refers to banks, investment firms, inter-dealer brokers, agency brokers and hedge funds in Australia and licensed corporations in Hong Kong which engage in dealing in FX products falling within the definition of “securities and “structured products” under Part 1 and Part 1A of Schedule 1 of the Securities and Futures Ordinance (SFO), or “futures contracts”, as defined in section 1 of the SFO. Licensed corporations which are licensed to carry on Type 3 regulated activity (leveraged foreign exchange trading), as defined in Part 2 of Schedule 5 to the SFO, are excluded.
- The establishment of the FX Global Code was facilitated by the Foreign Exchange Working Group, which operated under the auspices of the BIS Markets Committee and consisted of central banks from 16 jurisdictions around the globe.
- See the Bank for International Settlements’ 2019 Triennial Central Bank Survey – Foreign exchange turnover in April 2019.
