Minutes of the London FXJSC Operations Sub-committee Meeting – 22 November 2023

Minutes

Item 1 – Welcome and Apologies

Kerry Peacock (Chair, MUFG) welcomed guest presenters Shreyas Gopal (Deutsche Bank) and John Hosking (HSBC). There were apologies from Gail Smith (RBC), Mike Irwin (XTX Markets), Andrew Grice (Bank of England), and Andrew Rogan (UK Finance).

Item 2 – Minutes of the September Meeting and update from the September Main FXJSC Committee Meeting

The minutes of the 21 September 2023 meeting were agreed.

The Chair updated members on the September Main FXJSC Committee meeting, where there had been a discussion on the implications for transparency and market functioning due to the falling share of transactions going through primary venues.

It was noted that primary venues continued to be valued for offering prices that were executable, public and resilient in times of market stress, whilst secondary venues were perceived as often offering tighter spreads and greater ability to customise execution.

In relation to any further decline in primary venues, some members felt that price formation would migrate to other venues, whilst other members saw value in maintaining primary venues as a single point of reference that could be relied upon in times of stress.

Item 3 – Investment Association Update

Alex Chow (Investment Association) provided an update on three focus areas for the Investment Association. These were: i) Reject codes; ii) New European Market Infrastructure Regulation (EMIR) Refit Reporting Standards, iii) T+1 Settlement.

Item 4 – CLS Update

John Hagon (CLS) noted a deterioration in the performance of the CLS ecosystem in 2023 relative to previous years and outlined what CLS is doing to try to drive improvement in 2024. 

In relation to accelerated securities settlement (T+1), Mr Hagon noted CLS’ recent survey on the potential impacts to market participants of an extension to the timing of its Initial Pay-In Schedule. He noted that 90% of those surveyed had responded, including 19 of the top 20 Settlement Members and 9 out of the top 10 custodians.  There was a range of responses from minimal impact to significant impact, including development work, associated with moving the time by 30 mins, 60 mins and 90 mins.  The next step is to do a deep dive into these results in order to better understand them.  CLS is also exploring the impact of doing nothing and is consulting with as many interested parties and stakeholders as possible.

Item 5 – GFXD Update

Steve Forrest (UBS) provided an update from the latest Global Foreign Exchange Division (GFXD) meeting. The main discussion had been around accelerated securities settlement (T+1) and the related CLS survey. There was also a reminder regarding the new FX Settlement survey being trialled as part of the FXJSC October semi-annual survey round and the upcoming deadline.

The Committee briefly discussed FX volumes increasing in the Middle East, noting they were seeing greater volumes in Saudi Riyal, Qatari Riyal, and Omani Rial.

Members also discussed the International Monetary Market (IMM) date on 20 June 2024 which had the potential to be the largest settlement day on record outside of a market shock.

Item 6 – SWIFT Update

Joe Halberstadt (SWIFT) gave an update on the substantial changes to MT306 message going live as part of the 2023 standards release. Further changes will be made in 2024, to support confirmation of averaging options and forwards. He further noted that significant changes have been requested by the community to the format of postal addresses in ISO20022 payments messages. These will be implemented in two phases between 2025 and 2026.  The changes will introduce hybrid postal addresses, which will include mandatory structured elements for town and country, as well as unstructured elements. These changes are likely to have an impact on FX confirmation messages, such as the MT 300. SWIFT will work with the industry over the coming months to determine the best way forward. There was also a reminder that from November 2025 all parties should adopt ISO 20022 for cross-border payments, noting that migration had already started.

Item 7 – FCA Regulatory Update

Oliver McCausland (FCA) updated the Committee on UK accelerated securities settlement and the work of the Accelerated Settlement Taskforce. He noted that the Taskforce was mindful of the potential knock-on impacts to the FX market of moving UK securities settlement to T+1.

Item 8 – Feedback on Contingency test

The Chair provided feedback following a recent contingency test where members were asked to join a call at short notice as they would be in response to a crisis. The Committee discussed how it might improve the response rate in future, in particular outside of working hours.

Item 9 – Market Conditions Update

Shreyas Gopal (Deutsche Bank) provided an update on current market conditions. FX Markets had generally seen low volatility during 2023 across most currency pairs. Mr Gopal noted an almost record narrow range for EURUSD and EURGBP, despite relatively sharp moves in bonds and rates. Looking ahead, geopolitics was cited as a key risk to FX markets.

Item 10 – Artificial Intelligence (AI) Overview and Discussion

John Hosking (HSBC) provided an overview on Artificial Intelligence (AI), its potential uses in the FX industry, and how AI had grown exponentially over the past 20 years, driven in part by the availability of ever larger quantities of data and computing power.

Mr Hosking noted that some firms were already using AI for fraud detection. He also summarised a series of potential AI use cases across the FX trade life cycle, from trade execution to reconciliation.

Item 11 – Any Other Business

The Chair advised that Terri Van Praagh (Northern Trust) had stepped down from the Committee and thanked her for work.

The Chair also asked for volunteers to join a working group to review the FXJSC’s crisis playbook.

Finally, the Chair noted that this would be his last meeting as Chair of the Committee. James Kaye (HSBC) would take over as Chair with immediate effect.

Attendees

Aaron Mills – Citadel

Adam Jukes – Deutsche Bank

Andrew Rogan – UK Finance

Anna Chadderton – Goldman Sachs

Boyd Winston – JP Morgan

Claire Forster-Lee – Morgan Stanley

Fiona O’Riordan – Citibank

Gavin Platman – Insight Investment

James Kaye (Deputy Chair) – HSBC

Joe Halberstadt – SWIFT

John Hagon – CLS

Kerry Peacock (Chair) – MUFG

Oliver McCausland – FCA

Steve Forrest – UBS

FXJSC Secretariat

Enyi Chen – Bank of England

Joe Hearn – Bank of England

Matthew Hartley (Legal representative) – Bank of England

Natalie Lovell – Bank of England

Zish Jooma – Bank of England

Guest attendees

Andrew Middleton – Goldman Sachs (Alternate)

Emily Martin – Bank of England (Alternate)

James Andrews – JP Morgan (Alternate)

John Hosking – HSBC (Presenter)

Shreyas Gopal – Deutsche Bank (Presenter)

Apologies

Andrew Grice – Bank of England

Andrew Rogan – UK Finance

Mike Irwin – XTX Markets

Gail Smith (Deputy Chair) – RBC