FX Ethics Revamp Spurs Citigroup Training, App for Traders

(Bloomberg) -- Traders in the $5.1-trillion-a-day currency market are getting a refresher course in good behavior.

The publication of the FX Global Code last week has market participants weighing how the document’s 55 principles -- crafted by industry leaders and central bankers as part of a global cleanup effort -- will affect their jobs on a daily basis.

For Citigroup Inc., the world’s largest currency trader, the answer is a sweeping educational initiative. The bank has trained about 1,300 staff globally on market conduct in the past few years, dovetailing with the recommendations set out in the new handbook. The ACI Financial Markets Association has unveiled an online portal offering its roughly 9,000 members a way to take tests on the standards. The training will eventually be available via mobile app.

“We have spent a lot of time, energy and money implementing changes,” Itay Tuchman, Citigroup’s London-based global head of foreign-exchange trading, said by phone. “It is a core objective of ours to rebuild the faith and trust in our industry.”

Scandal’s Aftermath

The voluntary guidelines aim to root out misconduct after a rate-rigging scandal that unfolded in recent years led to combined fines of about $10 billion for a group of banks, including Citigroup. The 75-page code is the culmination of a two-year effort steered by major central banks, which have pledged to adopt the framework and expect their foreign-exchange counterparties to follow suit. Critics say the standards aren’t a strong enough deterrent because they don’t impose legal or regulatory obligations.

The code “falls short,” James Singleton, chief executive officer of Curex Group, which operates a currency-trading platform, wrote in a report. “It is not likely to create a reformed, transparent and ultimately fair market. The chief reason for that is the fact that the code is ultimately aspirational.”

Most market participants will probably incorporate the code into business practices within a year, said Guy Debelle, deputy governor of the Reserve Bank of Australia, who led a group of central bankers in developing the standards.

“We want to be known as a market leader to champion good practice,” said Tuchman at Citigroup, which signed a statement committing to the code upon its release. “If we do that, our business will be better off.”

The bank has incorporated the principles into its operations, according to Mike Lawrence, global chief administrative officer for foreign exchange and local markets.

Citigroup trained employees on market conduct through classes in 20 countries and electronic courses, in a program that includes about 70 specific examples. The bank also built monitoring tools designed to detect potentially inappropriate behavior.

200 Questions

ACI’s training includes more than 200 questions, tailored to individual roles, that market participants can use to test and certify knowledge of the principles. Companies using ACI’s system can also set target scores for employees.

Millennium Global Investments Ltd., a London-based asset manager, wasted little time debriefing its staff on the guidelines.

“I have just come out of a training session” related to the code, Richard Benson, managing director and co-head of portfolio investment, said in an interview the day after the standards’ release. “Ongoing compliance training has been and always will be part of our standard practices and ethos.”

For all the efforts to promote best practices, the fixing scandal is still reverberating across the industry. 

Three British currency traders charged with conspiring to manipulate markets look set to agree on deals to surrender to U.S. officials, according to people with knowledge of the situation. Last week, BNP Paribas SA was fined $350 million for its involvement in currency manipulation.

“I hope and believe that the industry will adhere to the code, but in a market as global and diverse as foreign exchange, there will probably still be some bad apples,” said Dan Marcus, CEO of trading venue ParFX. While adopting the principles will probably add to costs across the industry, “it’s very hard to argue against them.”

To contact the reporters on this story: Lananh Nguyen in New York at lnguyen35@bloomberg.net, Stefania Spezzati in London at sspezzati@bloomberg.net.

To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net, Mark Tannenbaum, Dave Liedtka