Regulatory, Compliance and Ethical Standards
The regulatory landscape
FX is regulated through a patchwork of conduct, prudential, and market-abuse rules rather than a single global regime. Candidates must know the roles of national regulators, the FX Global Code as a voluntary principles-based standard, and the importance of benchmark reform (the shift from interbank offered rates to risk-free rates) for FX products. Understand market-abuse prohibitions: insider dealing, manipulation, and false or misleading transactions, including spoofing and layering.
Conduct and ethics
Key conduct themes include best execution, fair and transparent pricing, conflicts of interest, confidentiality and information handling, and the prohibition on sharing client order information inappropriately. Pre-hedging and last look are contentious practices addressed by the FX Global Code. Candidates must recognise that a practice can be legal yet unethical, and that firm policies may exceed regulatory minimums.
Traps in questions
Common traps: treating the FX Global Code as legally enforceable; assuming compliance with local law is sufficient when firm policy is stricter; and confusing market manipulation with legitimate trading that happens to move prices. Watch for questions about disclosing client information to other desks - generally prohibited absent consent or legal requirement.
Rule of thumb
Ask three questions: is it legal, is it consistent with the FX Global Code and firm policy, and would it withstand public scrutiny? A no to any of these signals a conduct problem.
Worked example
A dealer learns of a large client order and trades ahead of it for the firm's book without disclosure or authorisation. Even if local law is silent, this breaches conduct standards on conflicts and information handling and would fail the FX Global Code principles.