Get documents about "FXAR04 EB
Document Sample
Ethics,
Best Practices,
and
Self-Regulation:
A Crossroads for the Global
Foreign Exchange Market
A speech presented by Mark Snyder,
Chair, Foreign Exchange Committee,
at the FX Week USA 2004 Congress
July 13, 2004
101
Ethics,
Best Practices,
and
Self-Regulation:
A Crossroads for the Global
Foreign Exchange Market
Introduction
I am honored to have participated in the work of the Foreign Exchange Committee
for the past five years and to have been named its Chairman this past January. And
I am very pleased that the organizers of this event have seen fit to recognize the
efforts of our Committee to improve the integrity and functioning of the global
foreign exchange (FX) market.
I’d like to acknowledge in particular David Puth of JP Morgan Chase, who
preceded me as the Committee Chairman, and Dino Kos and his team at the
Federal Reserve Bank of New York, who provide invaluable infrastructure, inputs,
and a home-away-from-home for our Committee.
In my comments today, I have three objectives:
First, I’d like to reflect on some of the “bumps in the road” that our industry has
endured over the past couple years—large FX-driven losses due to a host of
weak management practices and trader fraud, as well as criminal prosecutions
and the like—and suggest that in any capital market, particularly in an unregu-
lated market such as foreign exchange, personal, corporate, and industrywide
ethics matter.
103
Second, I’d like to reiterate the critical trading losses resulting from disregard for
importance of industry best practices and professional ethics would be a thing of the
acquaint or reacquaint you with the work past. Free market competitive forces would
of our Committee in this context. reign supreme, unleashing creative energies
and driving robust sustainable volume growth
Finally, I’d like to consider the very special
in world currency markets.
role of foreign exchange as an unregulated
financial market—self-governed, super- It is a market reality that FX plays an integral
vised, but not regulated. I’ll make the case
role in the efficient use of capital and labor
that this unique circumstance is a great
allocation. Frankly, through the globalization
virtue of the currency business as com-
pared with other capital markets, and that of finance and trade we help facilitate rising
this circumstance places on us a special living standards the world over. But it is also a
burden to conduct our business in accor- reality that individuals with little regard for the
dance with the highest possible stan- impact of their activities on the welfare of
dards. others have been tempted to place short-
term personal gain—or sometimes just status,
Ethics Matter it seems—above the best interests of their
Ethics matter. I believe they matter for reasons firms and of the market at large. But I would
not often spoken of in the financial markets make the case that this short-sighted thinking
is actually at the expense of their long-term
because people are more than simply rational
economic self-interest. Foreshortened trading
economic agents that seek to increase their
and sales careers, disgorgement of profits,
wealth as their only utility function. If people
fines, and even prison time, after all, don’t
are to find meaning and significance in their
add up to sound personal financial or career
lives, which I believe are two of the key yearn-
management.
ings all people have, then ethical standards
must be integrated into their daily commercial Trust has an intangible, difficult-to-
decisions. However, if others don’t share this measure, but nevertheless real market value.
same belief about the nature of man, then But in contemplating the role of trust in a
ethics also matter if only in the sense of enlight-
market, I think we have to ask ourselves how
ened self-interest. In a perfect world, all dealers
trust is established and maintained on a day-
in the over-the-counter FX market—together
to-day basis. Can we legislate trust? Can we
with other participants in the wholesale FX
legally mandate ethical behavior and
market—would embrace best practice guide-
effectively enforce it through regulation? We
lines, ethical standards, and governance prin-
can try, but a world of regulatory enforcers
ciples so as to foster the highest possible degrees
and the combined efforts of the world’s
of trust and confidence in currency trading.
police agencies have never been able to
In this imaginary world of commercial eliminate even extreme ethical breaches
integrity above reproach, fraud and massive and criminal enterprise.
104 FOREIGN EXCHANGE COMMITTEE 2004 ANNUAL REPORT
No amount of regulation will ever be able appears to have let quantitative risk manage-
to do for us what we must do for ourselves. ment erode into undisciplined punting and
And I’ll return to this idea at the conclusion of led senior management to look the other
my remarks. way as the situation drifted toward its
inevitable conclusion.
For now, I’d like to briefly review a pair of
the better-known blowups and scandals seen So did internal risk management systems
in our industry over the past few years and fail? Or did individual firm employees choose
note a common theme. These activities— to ignore the red warning lights of those
ranging from incompetent risk management systems? At the end of the day, it clearly doesn’t
to criminal fraud—can be seen as textbook matter, because the result is the same: short-
cases of the ethical dilemma that I have just term greed and hubris careening out of control
described: the inevitable tension between and collateral damage for employees beyond
the quick fix or short-term gain, on the one the desk, the bottom line of the firm, and the
hand, and the sustainable, profitable long run reputation for the FX industry as a whole.
on the other.
Operation Wooden Nickel was a very
The case of the National Australia Bank different affair. Fraud is fraud. And no amount
(NAB) is a cautionary tale for all of us tempted of regulation will ever prevent those with
to maximize returns with practices that stretch criminal intent from breaking the law. But as
the limits of our skills and competence. A with trading blowups, this scandal—uncovered
regional institution with a steady book of by a combined task force of the Federal Bureau
profitable sell-side businesses, NAB appears of Investigation and the Commodity Futures
to have been testing the deep waters of the Trading Corporation and resulting in charges
currency options markets by taking risks for against a total of forty-seven people (five from
which it was not prepared. Result: 360 million the wholesale FX banking marketplace)—began
Australian dollars in trading losses; many with a slippery slope that led from less-than-
ruined careers amongst traders, their optimal trading practices straight through to
managers, and corporate executives; and criminal conspiracy.
pending civil and criminal penalties.
At the heart of the Wooden Nickel
Decisions made by individual traders were incident, which included accusations of fraud
clearly to blame for the events that transpired. against retail investors and against some of the
But according to media reports, the best known and most respected firms in our
supposedly “rogue” trading activities had in industry, appears to have been a criminal
fact been noticed over time. High turnover abuse of a long-tolerated but much discour-
among trading and supervisory personnel, aged practice of allowing “off-market deals”
coupled with the temptation to garner higher and the awarding of “points” to grease the
bonuses and perhaps traders’ attempts to skids of commerce between banks and voice
elevate their market status as “big hitters,” brokers. The affidavit filed in the case calls it a
ETHICS, BEST PRACTICES, AND SELF-REGULATION 105
“points-for-cash scheme.” While those of us in procedures, and controls over disputed
the currency markets can read the affidavit and contracts by a financial institution can result in
see that the fraud involved more than the inaccurate records, misleading reports filed
abuse of voice broker points, and that the with regulatory and tax authorities, misappli-
amount of fraudulent gains was small by cation of funds, and potential violations of the
wholesale financial market standards, the fact institution’s internal policies and Federal
remains that allegations against the over-the- criminal laws regarding gifts to bank
counter foreign exchange market in the personnel. The U.S. bank regulatory agencies
affidavit are not flattering. I quote: “Based upon have found that the use of ‘points’ is a practice
information received from various cooperating that can lead to significant abuse and is
witnesses in the forex industry, I have learned considered an unsafe and unsound banking
that, over a period of at least twenty years, practice.”
there have existed schemes involving rigged
forex trades being passed from corrupt bank Pretty clear: It’s a bad idea; don’t do it.
traders at large financial institutions to co-
conspirators in exchange for kickbacks.” Clearly I know that there’s often a disconnect
a statement such as this does not do any of us between the executive offices and the trading
or the industry any good. floor. And I know that currency dealing is a
complex enterprise—it certainly is on my
The practice of lending points to a broker in desks. But when armed federal agents are
order to facilitate the broker’s effort to deal at an leading your traders away in handcuffs . . .
off-market price in order to hide a trading loss is
well, it’s a little late to take notice! We all need
a vestige of relationship-based trading that is
to insist that all traders are clear on what is
rapidly disappearing as financial institutions
expected of them, and to ensure that desk
adopt more comprehensive risk management
managers grasp their oversight duties clearly.
and, increasingly, electronic trading.
It is disheartening to know that discredited
The Foreign Exchange Committee, for its
practices are taking place in our industry. And
part, has discouraged the practice for nearly
it is, I admit, a little satisfying to see
twenty years. As stated in the Committee’s
malfeasance punished. But it can’t make
1987 annual report: “Whatever an institution’s
anyone happy to read something like the
policy may otherwise be, under no circum-
harsh assessment that appeared in the
stance should a trader request or a broker
November 24, 2003, issue of Securities Week
agree to lend points.”
magazine: “The over-the-counter forex
It’s hard to be more definitive than that. market is lightly regulated and huge and it has
become known as a hotbed of fraud.”
On August 1, 1990, the Fed here in New
York issued a formal policy statement on the Think about that: a hotbed of fraud.
use of points, stating that “ineffective policies,
106 FOREIGN EXCHANGE COMMITTEE 2004 ANNUAL REPORT
I don’t recognize that description as the principles of these guidelines. The reason for
market in which I work. Another example of the failure of ethics codes, Dobson suggests,
concern about ethics in our industry came to is “acculturation—that is, implicit education
my attention in May while sitting on a panel at into a certain moral value system. Individuals
a conference in London along with a number become acculturated by the day-to-day
of my distinguished colleagues. A couple of behavior they see around them because they
currency overlay managers commented that a assume such behavior is what is rational and
few of their pension fund clients were acceptable in the field. In the financial
concerned about which banks their managers services industry, the implied moral
were dealing with in the wake of all the “FX education comes through exposure to the
market scandals” and had questioned whether value systems displayed in educational
they “reviewed the standards of conduct of institutions, the industry, and people’s firms,
their FX banks.” If this is how those outside our particularly by the firm’s senior managers.
industry see us, then we have some work to Acculturation comes from observing the
do. Simply declaring codes of ethics and the actual behavior of other individuals.” In other
like isn’t enough. Frankly, the kind of fraud words, unless most people see leaders
walking the walk as well as talking the talk
uncovered in the Wooden Nickel affair might
around them, all the ethics codes in the world
easily have moved under the radar of senior
will have little effect.
managers—even those committed to sound
trading practice. Sustainable and above-board business
practice is rational and wholly consistent with
Much of contemporary financial education
wealth maximization. Organizations composed
and practice is dedicated to wealth maximi-
of ethical professionals excel in long-term
zation as an end in itself. And certainly, making
financial performance. I’ll return to this topic
money for one’s clients, one’s employer, and
at the conclusion of my remarks.
oneself is a defensible rational practice wholly
consistent with fiduciary responsibility. But we Clearly, unless we get our own house in
need to integrate ethical thinking in the fabric order, others outside our industry may try to
of our workplaces—if for no other reason than do it for us. And ignorance is no excuse. The
that ethical behavior is in the long-term Foreign Exchange Committee is doing an
economic interest of each and every one of us. awful lot to ensure that our colleagues in the
FX market are aware of what constitutes best
In a recent paper in the Financial Analysts practice, what constitutes unwelcome
Journal entitled “Why Ethics Codes Don’t impermissible behavior, and the kind of high
Work,” John Dobson persuasively argues that standards to which I think we must aspire.
essentially all financial services professionals
have been exposed to guidelines on ethics So let me turn to the “blatant self-
and professional responsibility, yet too many promotion” section of my remarks and tell
individuals have ignored even the basic you about the Foreign Exchange Committee.
ETHICS, BEST PRACTICES, AND SELF-REGULATION 107
Market Best Practice and the Foreign Russian debt crisis; the collapse of LTCM (Long-
Exchange Committee Term Capital Management); the exponential
For the past twenty-six years, the Foreign rise in currency and interest-rate derivatives; the
Exchange Committee, composed of represen- proliferation of hedge funds; the dramatic
tatives of major financial institutions, has met to expansion of electronic FX trading; unnamed
discuss technical issues and best practices of FX trading; and many other issues.
the FX and international money markets. In
partnership with our colleagues in the Federal Throughout, our intention has been to
Reserve Bank of New York, the Foreign ensure a smooth-functioning and growing
Exchange Committee has served as an impartial currency market. This goal is particularly
forum for the exchange of knowledge and infor- important because as finance has globalized
mation among leading currency practitioners— and capital has moved with steadily
all with a view to forging a collective vision of increasing volume and speed, the FX market
the ethics, standards, and practices that we has become mission-critical infrastructure
believe would best serve an efficient FX market. for every other kind of securities market.
Throughout my involvement with the The Committee is a voluntary association—
organization, I have been consistently our purpose is to make recommendations—
impressed by the diversity of views held by and we have no enforcement mandate. One
Committee members and the vigorous of the Committee’s key goals is providing
exchange of views taking place under its leadership on issues of concern to
auspices. I can assure you that when the organizations involved in the wholesale
Committee decides upon a technical foreign exchange market. It is true that
recommendation or urges a best practice, governmental banking supervisors and
that consensus view has been well earned regulators often look to the Committee’s best
through vigorous discussion and an honest practice guidance when reviewing firms
exchange of different perspectives. I know involved in trading foreign exchange.
that many of you know my current Thankfully, supervisory enforcement is there-
Committee colleagues and those that have fore not part of the Committee’s mandate.
served in prior years, and I doubt you would
consider any of them shy! We think we have a full agenda simply
gathering and disseminating the collective
Over the years, the Committee has helped wisdom of the world’s most important FX
our industry evolve through many tumultuous practitioners. To this end, the Foreign Exchange
phases in the growth of financial markets, Committee has produced many helpful policy
including the rocky road to European currency letters, memoranda, papers, and substantial
union; the interplay between currency, fixed annual reports and documents, most of which
income, and equity markets; market disloca- are available on our website, which you can
tions associated with dramatic currency find at the site of the New York Fed at
movements in Europe, Asia, and elsewhere; the <www.newyorkfed.org/fxc>.
108 FOREIGN EXCHANGE COMMITTEE 2004 ANNUAL REPORT
Among the Committee documents that are Another important Committee document
regularly updated as the FX industry evolves, I is the Management of Operational Risk in
will highlight three. Foreign Exchange—a comprehensive text that
details sixty best practices to help manage the
Guidelines for Foreign Exchange Trading revolutionary changes under way in the FX
Activities seeks to provide all participants in the marketplace.
wholesale foreign exchange community with
a common set of best practices that will assist This checklist of best practices seeks to aid
them in the conduct of their businesses. industry leaders as they develop internal
Through this document, the Committee seeks procedures and guidelines aimed at improving
to promote market efficiencies and transpar- risk management—including direct or indirect
ency and to facilitate informed decision making. loss resulting from inadequate or failed internal
procedures, staffing, and systems or from
Guidelines covers trading issues such as external events. Often, operational risk in the
time-proven best practices for trading staff; FX context centers on transaction processing,
safeguards for trading with electronic brokers; product pricing, and valuation—all of which
procedures for special trading practices, can hurt a firm’s profitability.
including historical rate rollovers, stop-loss
The best practices cited in the document are
orders, and switches; and solutions for trade-
designed to mitigate some of the operational
related problems.
risks common to FX in the belief that if
individual market participants take advantage of
With regard to FX sales, the document
the Foreign Exchange Committee’s counsel, we
stresses the critical importance of “know your
can reduce systemic risk in the market overall.
customer” (KYC) duties—for example, the
We encourage FX market participants to use
avoidance of transactions with unnamed and this checklist to periodically review the
undisclosed counterparties and diligence in integrity of their own operations.
identifying suspicious customer activities,
inappropriate customer dealings, and The best practices are grouped into
sections based upon the seven steps of the FX
evidence of money laundering.
trade process flow: pre-trade preparation,
Guidelines for Foreign Exchange Trading trade capture, confirmation, netting, settle-
Activities provides suggestions on the effective ment, nostro reconciliation, and accounting/
management of the risks facing every FX trading financial control processes.
business—including market, credit, settlement,
In recognition of the growing variety of
liquidity, operations, and legal risk. Finally, the institutions involved in foreign exchange
document emphasizes the importance of today, I would draw your attention to one
ongoing staff training. additional document, Foreign Exchange
Transaction Processing: Execution-to-Settlement
Recommendations for Nondealer Participants.
ETHICS, BEST PRACTICES, AND SELF-REGULATION 109
This text seeks to share the experience of investment and trade are booming and where
financial institutions regularly engaged in the the currency trade lacks the depth and
FX market with nondealer institutions that experience of leading currency centers such
may participate in the FX market on a more as New York and London.
occasional basis. The document highlights
twenty-two issues related to risk awareness Take these documents,extract their essence,
for nondealers such as asset managers and adapt them to your local circumstances and
hedge funds. needs, and by all means feel free to engage in
our collective conversation so that we can
Among the specific topics addressed are develop our best practices on a global level to
KYC concerns and counterparty identifi- our mutual benefit.
cation, electronic trading, segregation of
duties, timely trade entry, trade confirmation,
Foreign Exchange Committee Agenda
and prompt resolution of confirmation
The Foreign Exchange Committee agenda for
discrepancies.
the coming years is as challenging as it has
This document strongly urges that firms been at any time in our history. In response to
continually evaluate their trading procedures, the Wooden Nickel events, today we have
trade capture systems, accounting policies, issued an updated letter advising against the
operational procedures, and risk management practice of points. This document can be
tools. It urges the establishment of codes of found on our website as well as the associated
conduct in conformity with applicable laws updates to the Guidelines for Foreign Exchange
and industry conventions, as well as the Trading Activities. We are also looking at the
documentation and periodic update of increasingly blurred line between wholesale
policies and procedures. and retail foreign exchange.
These documents represent the collected In this connection, we are looking more
wisdom of hundreds of FX professionals who closely at prime brokerage and at the use of
have guided our industry for a quarter century. I white labeling of electronic FX. For example,
don’t think they contain all the answers, and I in a dealing chain that involves a primary FX
certainly don’t think that a group of us meeting bank, secondary banks and/or prime brokers,
at the New York Fed have either the right or currency overlay managers, and end-users,
inclination to suggest that FX practitioners all who exactly has KYC responsibility?
over the world adopt them word for word.
In addition to exploring these ethical
But I think that these guidelines—and others issues, we are continuing work on some post-
produced by partner Committees in other 9/11 initiatives such as contingency planning
markets—can serve as a vital blueprint for and operational continuity issues. We are also
other industry centers, particularly in continuing our collaboration with the Bank of
emerging economies where cross-border England’s Foreign Exchange Joint Standing
110 FOREIGN EXCHANGE COMMITTEE 2004 ANNUAL REPORT
Committee and with sister FX committees in a more critical role in global capital markets
Singapore, Canada, Europe, and Japan with and world trade than ever before. Not-
regard to unnamed trading activity as it relates withstanding trading errors and lapses of pro-
to fund managers. fessional ethics, I would make the case that
this diverse, noncentralized, self-regulating
The Foreign Exchange Committee is marketplace has evolved and flourished as
working with the Foreign Exchange Joint well as any capital market on earth.
Standing Committee in the United Kingdom
to produce an FX volume survey twice a year, Foreign exchange is at the heart of a
given that the universally used turnover survey globalized world in which cross-border trade
from the Bank for International Settlements is and investing are critical to fostering high rates
updated only triennially. of economic growth, sustainable investment
returns, and the efficient worldwide allocation
Our Operations Managers Working Group is of capital and labor. This is a huge responsibility
reviewing the benefits of electronic affirmations and, for the most part, I think we have lived up
and confirmations. The Committee is working to the challenges that we have faced.
with our colleagues in the Financial Markets
Lawyers Group on exotic option definitions Because the FX marketplace is one of the
and on Asian non-deliverable foreign least regulated on earth, interest in introducing
exchange transactions. regulation to the market is perennial. But there
are very good reasons why this idea has never
Finally, the Foreign Exchange Committee is moved beyond the talking stage.
undertaking a comprehensive communications
and outreach program. We are determined to
If It Ain’t Broke, Don’t Fix It
take our message of best practice, ethics, and
The FX market has withstood the dynamic
good governance as far as we can throughout
changes of modern markets well. Currency
the global currency market. To be frank, we’ve
practitioners, together with central banks,
been better at developing our intellectual
have provided abounding liquidity to other
assets than in communicating them. So we are
capital markets and to world trade; stimulated
committed to making the industry aware of
the emergence of new technologies, risk
these standards so that no one can deviate
approaches, products, and services; and
from them while claiming that they did not
ensured a smooth market environment for the
know of their existence.
greatest boom in cross-border finance that
the world has ever seen.
Self-Regulation and a Healthy
Marketplace Volumes have grown exponentially. Margins
The foreign exchange marketplace today is are razor-thin. Competition is vigorous. Every
undergoing perhaps its most dynamic and enterprise on earth—from tiny factories to
rapid evolution. At the same time, it is playing global asset managers—can obtain the
ETHICS, BEST PRACTICES, AND SELF-REGULATION 111
currency they need when and how they need appropriately priced, and liquid financial
it at transparent prices. These are the market on earth.
attributes of a thriving marketplace.
I think that we’re largely doing the right
things and delivering a vital service. Of
The Probity, Efficiency, and Ethics of course, it is incumbent on us to keep it that
the Foreign Exchange Marketplace
way. And the Foreign Exchange Committee,
Compare Favorably with Those of
Other Financial Markets together with central banks and others in our
Yes, we have endured occasional difficulties. industry, is working continually to maintain
But we have never seen anything like the sys- high standards, communicate them to new
tematic erosion of standards and practices that entrants in our industry, and incorporate them
we’ve been reading about in world equity in the DNA of our market culture.
markets in the wake of the boom and bust of
the 1990s. Equity markets are highly intrusively Regulating the Foreign Exchange
regulated. And yet they are far from immune Market May Well Be Impossible
from the ethical lapses, mispricing of assets, In truth, the FX market may be unregulatable.
and fraud that have resulted in disgorgement, It is governed well and it is ably supervised.
fines, and penalties and cost leading financial But the currency market is, by definition, a
firms and their customers huge sums of money. transnational market. One hundred percent
of our volume moves across borders. The
The mutual fund marketplace here in the only conceivable regulatory approach would
United States—arguably the most heavily involve a supranational agency governed by a
regulated major market in the entire financial board of world central banks attempting to
services industry—likewise appears to have impose standards and practices that would
allowed the widespread embrace of insider be appropriate for every economy on earth.
information, illegal trading, indefensible
sales practices, and the systematic abuse of Were we to achieve a globally imposed set
small investors in the interest of personal gain of standards and practices, the inevitable
on the part of traders, fund managers, and result would be a regulatory regime based
even the executive leadership of some of the upon the lowest common denominator of
best-known brands in the fund management market practice. I submit that it would
industry. decidedly not be in the interest of the global
economy for the deepest, most liquid market
My intention here isn’t to disparage the on earth to actually reduce the quality of its
values of other capital markets. But when I working infrastructure.
read about the supposedly chronic absence
of ethical practices in the currency arena, I Imposing a regulatory compliance regime
can’t help but reflect that the FX marketplace on the market would unavoidably lead to an
is arguably the most transparent, efficient, increased cost of doing business, which would
112 FOREIGN EXCHANGE COMMITTEE 2004 ANNUAL REPORT
in turn expand trading spreads and increase for operating their companies in the best long-
profit margin requirements with negative term interest of their shareholders through
consequences for every other capital market business practices that will be respected and
and for the global economy as a whole. rewarded in the marketplace.
Self-governance places responsibility for Speaking before the 2003 Conference on
the integrity of our market squarely on our Bank Structure and Competition, Chairman
shoulders. In the context of the Basel II Greenspan stated: “It is hard to overstate the
accords, this is doubly important. If ethical importance of reputation in a market
lapses and bad practice raise the risk premium economy. To be sure, a market economy
of our market, our parent institutions will have requires a structure of formal rules . . . but
no choice but to increase our capital-
rules cannot substitute for character.”
adequacy allocations, with unpredictable
Chairman Greenspan described corporate
consequences.
reputations as having “an exceptionally
FX might suddenly change from a relatively important market value that in principle is
low-overhead, “lean and mean” industry with capitalized on a balance sheet as goodwill.”
minimal capital requirements into an expensive
and less efficient market that would drive firms Chairman Greenspan went on to say: “We
out of the trade, thereby reducing liquidity, should not be surprised then to see a
efficiency, and trading diversity. The smothering reemergence of the market value placed on
of this market with intrusive, burdensome trust and personal reputation in business
regulatory requirements might have a corrosive practice. After the revelations of corporate
effect on every other financial market, raising malfeasance, the market punished the stock
the cost of global trade across the board. prices of those corporations whose behaviors
had cast doubt on the reliability of their
In other words, if we don’t keep our house reputations. Recent allegations on Wall Street of
in order, we may witness the permanent breaches of trust or even legality, if true, could
alteration of the entire economic predicate of begin to undermine the very basis on which the
our industry. world’s greatest financial markets thrive. Guilty
parties should be expeditiously punished.
The Trust Premium Some practices and rules have outlived their
Let me conclude by reiterating the notion that usefulness and require updating. But in so doing,
trustworthy business practices, defensible we need to be careful not to undermine the
and transparent dealings, and the like have a paradigm that has so effectively governed
real value in the marketplace. voluntary trade. Rewriting rules that have served
us well is fraught with the possibility for collateral
As Fed Chairman Alan Greenspan has often damage. I hope and anticipate that trust and
noted, it is incumbent on corporate officers integrity again will be amply rewarded in the
and senior managers to shoulder responsibility marketplace as they were in earlier generations.”
ETHICS, BEST PRACTICES, AND SELF-REGULATION 113
I believe that these ideas are doubly exchange industry—and the firms and
important in an unregulated over-the-counter individuals that compose it—can earn the trust
financial market such as our own. For the premium that Chairman Greenspan implies.
foreign exchange market, the counterparties’
word is the essential bond that ties together Foreign exchange markets are the central
the entire marketplace. It is in the best interest nervous system of the global economy. It is
of us all to ensure that we can promise a high up to us to ensure that these markets function
standard of conduct to the other capital in a trustworthy and sustainable manner for
markets and global corporations that depend the benefit of people all over the world.
on our services. In this way, the foreign
114 FOREIGN EXCHANGE COMMITTEE 2004 ANNUAL REPORT
