At the ASIC Market Integrity meeting this week, Calissa Aldridge, a group senior manager and oversee market intermediaries, gave updates to the changes happening in the FX markets.
Aldridge spoke about the deep dive into in the FX markets and specified five specific areas. This includes court enforceable undertakings that have been accepted by the five largest ‘financial institutions in Australia, focus on enhanced supervision for more complex risks in the market and she indicated that means onsite work in some cases, mark-ups and margins, and last look and high frequency trading.
Court Enforceable Undertakings
The EUs are the result of investigations over time.
“The result is that we have five CEUs with the ‘big four’ and Macquarie and the result there is that we are working very closely with the firms themselves and with the independent experts reviewing the proposed remediation.”
She added that ASIC has been working closely with the banks just ensure that the processes around remediation are ‘fit for purpose’.
Aldridge said that this engagement with experts will also give regulator material it can publish over the summer about best practice that sits within the FX global code.
Aldridge also gave on an update on the ‘FX on sites’ reviews which she differentiates from the continuous monitoring that has been mentioned in relation to the big four banks and AMP, however, the purpose for these are the same in delving deeply and catching issues early.
“We have now commenced our onsite reviews at the non-bank FX providers in Australia,” she said. “We are in the process with running with two and the moment and we will continue with more in the New Years shortly after Christmas.
“The focus has been conflicts of interest and the management of confidential client information. In accordance, obviously looking at the global code but also focussing on your obligations in the corporation’s acts, existing guidance, for example, on conflicts of interest and the report that we released, report 523.”
She said that this is really an opportunity for a firm to present to ASIC its policies and practices, and how the system is evolving and they are testing the policies and procedures and see how they match with the practice of the policies.
Other focal points of these reviews have been across sales, the trading desk, risk monitoring, surveillance, and compliance functions.
“It is a great way, just being there I think, to raise the presence of regulation compliance within the organisation and help compliance people in the organisation to have slightly more of a voice.
She added that once ASIC is done with the reviews, they will release some of their observations not just to the organisations concerned, but also an industry-wide communication.
Close and Continuous Monitoring
Oliver Harvey, senior executive or market infrastructure for ASIC addressed the developments in close continuous monitoring.
Harvey said that this program has been designed to focus on the key decision makers within an organisation.
“By that, I mean less around compliance functions and more around the board, the c-suite, and the CEO—that’s going to be very much part and parcel with the infrastructure that we are outing in place for the support,” he explained.
Harvey also highlights a focus on the root cause of the poor conduct. He continued that this will focus on issues of governance, accountability and incentives, systems and oversight in the organisations.