Minutes of the London FXJSC Legal Sub-Committee Meeting – 10 June 2021

Minutes

Date of meeting: 10 June 2021 | Location: Video meeting

Item 1 – Introduction and Minutes

The minutes of the meeting of 4 March 2021 were approved.

Item 2 – Price Source Disruption

John Ball (GFMA) provided an overview of the EMTA Template and Guidance, mitigation of basis risk and highlighted potential alternative calculation agent methodologies. First, John outlined that both the EMTA Templates and guidance states that valuation postponement for Price Source Disruption ends either (i) when the Price Source Disruption ceases to exist, or (ii) upon reaching the Maximum Days of Postponement. The members discussed that the differing methodologies used by calculation agents for calculating settlement price gives rise to basis risk. John outlined two proposals for a methodology to mitigate basis risk:

1. Where appropriate, the calculation agent’s determination of settlement rate should use a combination of references sources from the Business Day prior to the valuation. References could include the price used to value books and records and determine bilateral margin obligation, the price used by the clearing houses to determine the margin obligations of each of its members and any other existing unofficial rate including the spot rate including (i) used in connection with any commercial transactions with offshore parties, (ii) provided by independent dealers, or (iii) quoted by electronic platforms; or
2. Alignment of the CCP methodology such that the settlement rate would be determined as of the valuation date, for example this would be the business day following cessation of the Price Source Disruption or the maximum days of postponement.

Item 3 – Format of FXJSC Meetings

With the majority of members still currently working from home Sharon Blackman (Chair) and Jonathan Grant (Bank of England) led a discussion with the members to obtain their views on the format of future meetings. Most members explained that their future working pattern would include a mixture of working virtually and physically in the office. There was a preference amongst the group for the return of in person meetings but the members did acknowledge that if the sub-committee meetings were hybrid or virtual this could enable those not located in London to participate more easily. The members concluded that, once it ceases to be necessary to run meetings entirely virtually, for the time being a hybrid meeting format would appear to be preferable, with members having the option of attending either in person or virtually.

Item 4 – Global FX Code update

Grigoria Christodoulou of the FXJSC Secretariat provided an update on the three-year review of the Global FX Code (‘Code’). The final proposed Code changes had been shared with the local foreign exchange committees, including the FXJSC, for approval, before the Code’s publication in July. Grigoria updated the members on the implementation timeframes for renewing existing Statements of Commitment to the Code. She noted that the Global FX Committee (GFXC) believed that a 6 to 12 month period for Market Participants to review their practices would be a reasonable timeframe to aim for, recognising that there could be some variation depending on the type of participant.

Item 5 – Any other business

The next meeting would be on a date to be announced.

Attendees

Sharon Blackman (Chair) – Citigroup

Jonathan Grant (Secretary) – Bank of England

Simon Goldsworthy – Deutsche Bank

David Harris – Financial Conduct Authority (FCA)

Tamsin Rolls – JP Morgan

Baljit Saini – NatWest

Rakesh Shah – Standard Chartered

Simon Helm – TP ICAP

Sunil Samani – XTX Markets

Nasia Pachiti Pallikaropoulou – Barclays

Diane Bouwmeester – LCH

FXJSC Legal Sub-Committee Secretariat

Zara Coe – Bank of England

Guest attendees

Selena Gablah – HSBC

John Ball – GFMA

Grigoria Christodoulou– Bank of England

Apologies

Dan Parker – Goldman Sachs

Nimisha Kanabar – Morgan Stanley

Richard Lamb – UBS

Jateen Shah – Bank of America

Gaynor Wood – CLS