(Bloomberg) -- An industry committee that aims to stamp out misconduct in foreign exchange trading is revising its guidelines to increase transparency in the loosely-regulated market.

The Global FX Committee, or GFXC, which oversees a voluntary code of best practices for the $7.5 trillion-a-day foreign exchange market, met in Frankfurt this week as it works to conclude a review of its guidelines by December.

The code has helped inhibit the types of manipulation seen in prior foreign exchange rigging scandals since the guidelines took effect in 2017, said Gerardo Garcia, head of operations at the Bank of Mexico and the committee’s chair. Global banks were fined more than $10 billion in foreign exchange manipulation cases during the previous decade.

“Best practice is being adopted. It’s being embedded into the market,” Garcia said in an interview.  

The group, comprised of central bank representatives and market participants, discussed revisions to the current guidelines on settlement risk, Garcia said. Almost a third of deliverable daily FX transactions in 2022, or some $2.2 trillion, were at risk of one party potentially failing to deliver the currency owed, according to a study by the Bank of International Settlements. 

The Global FX Committee is also looking to increase transparency for participants when trading with brokerages that are using their own inventory to complete a trade, rather than acting as an agent in the market, said Stuart Simmons, head of multi-asset solutions at QIC Limited, an Australian fund. “In those circumstances there’s a heightened need to have greater transparency around how that order is handled.”

The group is working on new ways to step up engagement with buy-side participants, who currently make up about 11% of the over 1,300 adherents to the code. Two-thirds of members are sell-side banks, with other participants like trading platforms making up the rest. 

Two thirds of global corporations that engage in foreign exchange transactions haven’t heard of the code, according to a study published in February by Coalition Greenwich, an industry research group. Buy-side firms should adopt the code to help make sure they are getting fair deals, said QIC’s Simmons.

“By adopting the code themselves, they’re sending a strong signal to their counterparty banks that they’re aware of what those banks’ obligations are,” Simmons said.

©2024 Bloomberg L.P.