Code of Conduct to regulate S.Africa's foreign exchange market


The South African Reserve Bank (SARB) and the Financial Services Board (FSB) have drafted a code of conduct for the South African over-the-counter markets to protect any potential threat to the rand trading.

This pre-emptive initiative was sparked by the 2013 whistle-blowing  and investigative journalism which pointed to misconduct by major international banks in the largely unregulated foreign exchange markets.

An investigation uncovered that a number of regulatory authorities worldwide were involved in the the possible manipulation of foreign exchange benchmarks.  There was sharing of confidential information among foreign exchange dealers as well as possible collusion and ordered manipulation to the detriment of clients by 15 banks, said the report.


“About a dozen banks had dismissed or suspended a number of foreign exchange traders and other employees.”

According to Deputy Governor of the SARB, Daniel Mminele, although there were no allegations levelled against South Africa, “it was deemed appropriate to be proactive and conduct a review of the foreign exchange trading practices among South African Authorised Dealers.

A task team was assembled and the objective of the review was to establish whether there was any misconduct or malpractice in the South African foreign exchange market and to put forward recommendations on how foreign exchange market trading practices may be strengthened to enhance the efficiency, integrity and credibility of the local foreign exchange market.

This task team was led by James Cross, a former senior deputy governor of SARB, to guide the Foreign Exchange Review Committee (FXRC), to conduct the review.  Among the major activities required to give effect to its Terms of Reference was the drafting of a code of conduct.

The findings of the FXRC were such that no residence of malpractice or serious misconduct in the South African foreign exchange market was discovered, there is however a scope for improvement in the overall market. Further findings showed that, there are whistle-blowing policies and complaint procedures for clients and majority of Authorised Dealers take cognisance of market conduct, governance and compliance in performance assessments.

Some of the recommendations made by the FXRC stipulated that an amendment to legislation be made to give the FSB sufficient powers to declare Codes of Conduct as subsidiary legislation. In order to ensure ongoing compliance and best practice, it is recommended a group of senior market professionals be formed under the auspices of the FSB and SARB.