Australian Foreign Exchange Committee Meeting Minutes

Sydney – 29 June 2017

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Attendees

Guy Debelle, RBA (Chair); Matthew Boge, RBA (Secretary); Chris Howlett, ACI Australia; Keith Sedergreen, ACI Australia; Mark McCarthy, AFMA; Simon Warner, AMP Capital; John Findlay, ANZ; Mark Ferguson, Australian Super; Winnie Tan, Bank of China; Stewart Cox, BHP Billiton (via conference call); David Hatzidis, CBA; Andrew Walsh, Citigroup; Rachael Hoey, CLS (via conference call); David Walden, EBS (via conference call); Stephen Gilmore, Future Fund; David Nolan, Goldman Sachs; Andrew Mourd, JP Morgan; Peter Fogarty, Macquarie Bank; Mark Lawler, National Australia Bank (via conference call); Stuart Simmons, QIC; Gary Latner, Thomson Reuters; Gareth Taylor, Westpac; Chris Knight, XTX Markets (via conference call)

Apologies

Lee Merchant, Deutsche Bank; Jason Griffin, RBA;

1. Minutes of previous meeting

The minutes of the previous meeting were accepted without modification.

2. Summary of 24 May Global Foreign Exchange Committee (GFXC) meeting

The Chair and Darryl Hooker (EBS) attended the inaugural meeting of the GFXC in London on behalf of the AFXC. At the meeting, the terms of reference and governance arrangements for the GFXC were agreed. The Global Code was endorsed by all the member FXCs. The Secretariat for the GFXC will comprise representatives of central banks that sponsor local FXCs.

In addition to its work agenda (see below), the GFXC discussed recent developments in Asian currency markets and was presented with analysis from Thomson Reuters on trading volumes and volatility during the fixing windows.

3. GFXC Work Agenda

The GFXC has requested feedback on practices related to the use of ‘last look’ in FX markets. Specifically, the GFXC has invited public comment on whether trading activity during the last look that utilises information from the client's trade request is consistent with good market practice.

The feedback window is open until 21 September and the GFXC will meet in mid-November to consider its response to the feedback. A paper summarising the submissions and proposing a way forward will be prepared by the GFXC Secretariat.

The GFXC will shortly publish a statement concerning the creation of public registers of Statements of Commitment to the FX Global Code. Until such a time that a suitable public register emerges, the Chair confirmed that the AFXC will publish on its website any Statements of Commitment received from local market participants (including AFXC members).

To monitor the impact of the Code on market practice, the GFXC intends to survey market participants globally about their awareness of the Code, their attitudes to it and their expectations of its effectiveness. The initial survey will likely be launched in late September, with the intention of following up with surveys in subsequent years to measure any changes. The Bank of England will administer the survey, with each local FXC compiling a representative sample of market participants that are willing to be surveyed. The Secretary mentioned that he may contact AFXC members for their assistance in creating the sample for the local market.

4. Time line for AFXC members' adherence to the Global Code

Going forward, members of the AFXC will be expected to demonstrate their adherence to the FX Global Code by signing Statements of Commitment. Several members have already done so. The Chair confirmed that the aim is for all members to have signed statements by the end of 2017.

5. Australian annex to the Global Code

At the previous meeting, members had been asked to consider whether an Australian annex needed to be attached to the FX Global Code to reflect specific practices in the local market. As the consensus of the responses submitted to the Secretariat was that an annex was not necessary, the Chair confirmed that no annex would be created at this time.

6. WM/Reuters Forward FX Benchmarks

Chris Howlett (ACI) briefed the Committee on enquiries he had received from market participants regarding WM/Reuters 4pm (London) fixes for AUD/USD and NZD/USD forward rates. Discussions with WM suggested that the wide (and variable) bid/offer spreads in these rates may have reflected prices sourced from less active participants in the market. Some improvement in the fixes has been noticeable since the matter was raised with WM.

7. General business

Members briefly discussed the EU's MiFID II reporting requirements, with some wondering whether the associated compliance burden will prompt changes in market structure.

8. Next meeting

The next meeting will be held on 21 September at 4pm, with the subsequent meeting on 8 November.