Minutes of the London FXJSC Main Committee Meeting - 26 September 2024

Minutes

Item 1 – Welcome

Vicky Saporta (Chair, Bank of England) welcomed guest presenters, David Adams (Morgan Stanley), Michael Grady (Aviva Investors), and from the Bank of England Andrew Nye, Sean Plumb, Sharon Wallis, Ali Moussavi, and Muna Lisimba.

Item 2 – June meeting minutes

The minutes of the 25 June 2024 meeting were approved.

Item 3 – Market update

David Adams (Morgan Stanley) and Michael Grady (Aviva Investors) presented an update on recent market developments.

The presenters explained that the Japanese yen was more sensitive to rates than to risk appetite relative to other currencies. Accordingly, the yen had been an attractive investment against a backdrop of anticipated US interest rate cuts and uncertain market risk sentiment. Members discussed potential yen strength should Japanese pension funds and life insurance companies repatriate their investments in light of tighter monetary policy by the Bank of Japan.

The presenters noted that the US policy outlook was binary, and largely depended on the result of the 2024 US election, which remained close. Members discussed the potential implications of the US election on the FX market and noted that some uncertainty could persist beyond the election as government policy unfolded.

Members also noted that FX market functioning had quickly returned to normal after the market volatility in early August 2024.

Item 4 – FX market resilience during recent operational disruptions

Andrew Nye, Sean Plumb, and Sharon Wallis (all Bank of England) reminded members of the Sector Response Framework (SRF) and how it was used to respond to systemic operational issues. They also provided an overview of the recent Consultation Paper on critical third parties to the UK financial sector^{footnote [1]}.

James Kaye (Chair of the FXJSC Operations Sub-Committee) noted that the Operations Sub-Committee had met on 18 September. The Committee had discussed the Swift and CrowdStrike issues in July and noted their limited impact on the FX market.

Members agreed that the FX market had been resilient during the operational issues due to its diverse and fragmented nature. Members discussed the work CLS was undertaking to support its resilience, including the establishment of an Alternative Processing Site. It was noted that the FXJSC Operations Sub-Committee was also revising its FX Settlement Crisis Management Playbook, which covered what firms should do in the event of an outage of a critical FX settlement system. Members expressed an interest in a future discussion on FX settlement resilience.

Item 5 – Bank of England’s approach to innovation in money and payments discussion paper

Ali Moussavi (Bank of England) provided an overview of the Bank of England’s approach to innovation in money and payments Discussion Paper published on 30 July 2024^{footnote [2]}. Mr Moussavi highlighted that innovation in money and payments presents opportunities and risks for central banks’ monetary and financial stability objectives. Therefore, central banks should actively engage with these innovations.

Members discussed how innovation in wholesale and retail payments could change the role of FX market participants and impact FX market structure. Members noted the benefit of extended Real Time Gross Settlement operating hours to support improved capability of Payment versus Payment settlement.

Item 6 – FXJSC Turnover Survey

Muna Lisimba (Bank of England) presented the April 2024 FXJSC Turnover Survey results. Mr Lisimba noted that the results were in line with long-term trends. Daily average turnover had increased by 14% in April 2024 from October 2023 to $3,351 billion. FX swaps remained the most traded instrument by turnover.

Item 7 – Global Foreign Exchange Committee (GFXC) update

Natalie Lovell (Bank of England) gave an update on the GFXC’s three-year review of the FX Global Code (the “Code”). Ms Lovell noted that the review had focused on further mitigating FX settlement risk and enhancing FX data transparency. A public consultation on the proposed changes to the Code was planned for October 2024, and the updated Code was expected to be published in December 2024.

Ms Lovell noted that the October 2024 FX Settlement Survey round had been launched. A total of seven central banks had adopted the new approach for collecting FX Settlement data for the October round, ahead of the 2025 BIS Triennial Survey which would use the same survey template.

Item 8 – FXJSC Sub-Committee updates

Sakshi Gupta (Bank of England) noted that the Legal Sub-Committee had met on 17 September. Agenda items had included: an update on the International Swaps and Derivatives Association’s review of its FX and Currency Option Definitions; and updates on the Code review and FX Settlement Survey.

Mr Kaye (Chair of the Operations Sub-Committee) noted that in addition to operational resilience the agenda items at its 18 September meeting had included updates on the Bank of England’s Meeting Varied People initiative, the Code review and FX Settlement Survey, and a discussion on the North America move to T+1 securities settlement.

Item 9 – Regular updates

Alan Barnes (Financial Conduct Authority) provided an update on the UK Accelerated Settlement Taskforce’s work. Mr Barnes noted that the Taskforce was due to publish its draft recommendations shortly. Mr Barnes also noted that the International Organization of Securities Commissions (IOSCO) had continued its work on strengthening pre-hedging standards and was expected to publish a report by the end of 2024.

Attendees

Alan Barnes – Financial Conduct Authority
Giles Page – Citigroup
James Kaye (Chair, FXJSC Operations Sub-Committee) – HSBC
James Kemp – Financial Markets Standards Board
Jeremy Smart – XTX Markets
Kate Hill – Aviva Investors
Kevin Kimmel – Citadel Securities
Mani Natarajan – Morgan Stanley
Marc Bayle de Jesse – CLS
Mimi Rushton – Barclays
Neehal Shah – BNP Paribas
Paul Houston – CME Group
Philippe Lintern – Bank of England
Rajesh Venkataramani – Goldman Sachs
Richard Bibbey – HSBC
Richard Purssell – Insight Investment
Sally Francis-Cole – London Stock Exchange Group
Sarah Boyce – Association of Corporate Treasurers
Sarah Collins – UBS Asset Management
Simon Manwaring – NatWest Markets
Sophie Rutherford – State Street
Stephen Jefferies – JP Morgan
Vicky Saporta (Chair) – Bank of England

FXJSC Secretariat

Laura Austin – Bank of England
Natalie Lovell – Bank of England
Sakshi Gupta (Legal Secretariat) – Bank of England
Sita Mistry – Bank of England

Guest attendees

Ali Moussavi – Bank of England
Andrew Nye – Bank of England
David Adams – Morgan Stanley
Michael Grady – Aviva Investors
Muna Lisimba – Bank of England
Sean Plumb – Bank of England
Sharon Wallis – Bank of England

Apologies

Galina Dimitrova – The Investment Association
Lisa Dukes – Corporate Representative - Association of Corporate Treasurers
Nina Moylett – M&G plc
Sharon Blackman (Chair, FXJSC Legal Sub-Committee) – Citigroup