ASIC reports on promoting better conduct in the wholesale spot foreign exchange market

ASIC released Report 525 Promoting better behaviour: Spot FX today. This report sets out ASIC’s observations on key behavioural drivers of conduct arising from recent ASIC investigations into the wholesale spot foreign exchange (FX) businesses of the major Australian financial institutions.

The spot FX market is a key global market and is of systemic importance to the Australian economy, with a daily average turnover of US$31.4 billion in Australia. The effective functioning of the spot FX market relies on all participants acting with integrity and fairness.

ASIC’s report illustrates the behavioural drivers of conduct that, in ASIC’s view, are likely to lead to poor conduct if not adequately managed. The report also describes a number of good practice principles for managing these drivers to more effectively prevent, detect and respond to inappropriate practices. Market participants should consider how these good practice principles may be adopted to improve their internal arrangements for managing risks relating to inappropriate conduct.

The release of ASIC’s report coincides with the release yesterday of Phase Two of the FX Global Code of Conduct (FX Global Code). The FX Global Code provides a global set of practice guidelines designed to promote the integrity and effective functioning of the wholesale FX market. Where relevant, Report 525 makes reference to related principles of the FX Global Code and encourages market participants to adhere to high standards of market practice.

ASIC Commissioner Cathie Armour said, ‘Conduct in the wholesale spot FX businesses of some of Australia’s largest financial institutions has fallen short of our expectations. We have taken enforcement action where we have come across this poor behaviour.

‘Our focus for the future is making sure this doesn’t happen again. Market participants need to make sure they have the appropriate systems and controls in place to prevent, detect and address inappropriate conduct within their organisation,’ she said.

ASIC will use this report as a reference point for its surveillance of the FX markets and, where appropriate, the broader wholesale over-the-counter markets.


ASIC’s investigations into the spot FX market have focused on identifying whether specific instances of misconduct occurred within the spot FX businesses of certain institutions. ASIC also considered whether the systems and controls of the spot FX businesses were adequate to address risks relating to inappropriate conduct identified by ASIC.

As a result of these investigations, ASIC has accepted enforceable undertakings (EUs) from National Australia Bank Limited, Commonwealth Bank of Australia, Westpac Banking Corporation, Australia and New Zealand Banking Group Limited and Macquarie Bank Limited (refer: 16-455MR, 17-065MR and 17-144MR).

As part of the EUs, the institutions acknowledged ASIC’s concerns about their failures to ensure their systems and controls were adequate to address specified risks. They also undertook to develop and implement changes to their spot FX businesses, which will be assessed by independent experts appointed by ASIC. The institutions have also made voluntary contributions amounting to $13 million to fund independent financial literacy projects in Australia.

The wholesale spot FX market is an important financial market for Australia. It facilitates the exchange of one currency for another, allowing market participants to buy and sell foreign currencies.

Spot FX contracts are FX contracts that involve the exchange of two currencies at a price (exchange rate) agreed on a date (the trade date), and which are usually settled two business days from the trade date.

© Australian Securities & Investments Commission. Reproduced with permission.