The $9.5 trillion-a-day foreign exchange market is pushing to review governance guidelines more frequently to keep pace with artificial intelligence. The Global Foreign Exchange Committee currently updates its best-practice principles once every three years. Market participants and GFXC representatives are debating whether to increase review frequency for technology-related risks. Introduced in 2017 after market-rigging scandals, GFXC's Global Code aims to stamp out misconduct in a market governed by a patchwork of local regulation. With margins already very thin, there is concern that another major failure could prompt costly, prescriptive regimes. The code is next set for evaluation in 2027, though it can be reviewed ad-hoc.
Representatives at the GFXC's last meeting in Toronto agreed that rapid technological evolution requires equally swift governance. Autonomous systems should align with the Global Code, and adherence should be prioritized amid increased automation. While widespread among banks and trading venues, relatively low hedge fund participation remains a focus for central banks. The Bank of England and Bank of Mexico are pushing for greater adoption. Flash crashes, including sterling's 2016 plunge, have been amplified by algorithms, shaping the Code's provisions on disruptive trading. Nir Vulkan, professor at University of Oxford, warned that AI can learn to replicate bad behavior, potentially causing market manipulation faster and worse than traditional algorithms.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing