Code of conduct for forex traders in the works

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is finalizing a code of conduct governing all trades in the country’s foreign exchange market that it intends to implement within the year to further improve transparency, price discovery and market conduct.

BSP Governor Nestor Espenilla Jr. said market participants would be required to follow the code of conduct covering ethics, governance, execution, information sharing, risk management and compliance.

According to Espenilla, the BSP intends to adopt the global code of conduct, but would be tweaked to apply to local setting.

The code, the BSP chief added, would also involve the establishment of a multilateral body to help police market participants.

The regulator has been enhancing governance and oversight over the foreign exchange markets to further improve transparency, price discovery, and market conduct.

“It doesn’t prevent speculation, what it prevents is taking position and then you try to move the market, that one is illegal but position-taking is not prohibited,” he said.

Espenilla said, market participants have to be transparent about their reporting to the BSP.

“We want to adopt it for the integrity of our own market,” he said.

The peso is the second weakest currency in the region after the Indian rupee, depreciating by about seven percent due to the normalization path undertaken by the US Federal Reserve, as well as the strong demand for US dollar to pay for the strong importation of capital equipment and raw materials to sustain the country’s strong economic growth.

The peso plunged to the lowest level in 12 years as it pierced the 53 to $1 level. The Development Budget Coordination Committee has revised its foreign exchange assumption to a range of 50 to 53 per $1 for 2018 up to 2022.

Last month, Espenilla said there were some signs of increasing speculation in the foreign exchange market.

He said the central bank has a big toolbox it could use to keep order in the domestic foreign exchange market.

“The countries decide on the tools that they would use depending on the situation that they are facing. So it depends on what is driving the extensive volatility. So if it is speculative activities, then there are specific things that the BSP can do using not just only its resources but its full regulatory powers,” he said.

Aside from the weak peso, the rising inflationary expectations have been attributed to the rising global oil prices as well as the impact of the implementation of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

  The BSP has so far undertaken 11 waves of foreign exchange liberalization measures in line with the central bank’s thrust to further liberalize foreign exchange rules, while maintaining a safe and sound financial system, a stable foreign exchange market, and an appropriate monetary policy.