Global Foreign Exchange Committee

The Global Foreign Exchange Committee (GFXC) is a committee of central bankers and experts working towards making the forex market more robust and transparent.

The objectives of the GFXC are:

  • to promote collaboration and communication among the local foreign exchange committees (FXCs) and non-GFXC jurisdictions with significant FX markets;
  • to exchange views on trends and developments in global FX markets, including on the structure and functioning of those markets, drawing on information gathered at the various FXCs; and
  • to promote, maintain and update on a regular basis the FX Global Code (the Code) and to consider good practices regarding effective mechanisms to support adherence.

Why needed?

Until recently, the daily exchange rate was fixed based on the currency deals that took place 30 seconds before and 30 seconds after 16:00 hours, London time. As the rate was based on actual transactions that happened over a short period of time, there was a potential for people to collaborate and place orders within the 60-second time frame. If these orders were large enough, they could affect the calculation of the rate. This also implied profits for the traders.

The scandal broke out when it was discovered that traders from some of the biggest banks had been indulging in such malpractice through online chat groups. The monetary losses caused by the manipulation have been estimated to be $11.5 billion per year for 20.7 million pension holders in Britain alone. The scandal led to many banks getting fined billions of dollars. It also resulted in several traders around the world getting suspended or fired.

Since then, changes such as simplified operating procedures, the introduction of new instruments, and the liberalisation of exchange controls have allowed the market to grow and become more flexible. 

The GFXC’s function of acting as a platform for discussing market trends and developments can also help the market grow. By observing the impact of the regulations, the Code can be modified to ensure that these market regulations do not inhibit the growth of the market. Therefore, by performing these functions, the GFXC can be a huge stabilising force for the FX market.