Minutes of the London FXJSC Operations Sub-committee Meeting – 18 September 2024

Minutes

Item 1 – Welcome and Apologies

James Kaye (Chair, HSBC) welcomed observers Paula Kenee (Northern Trust), Nikki Woodley (Northern Trust), Nimit Jobanputra (Deutsche Bank), Lorraine O’Donnell (UK Finance) and Aparna Shrivastava (Morgan Stanley). The Chair also welcomed guest presenters Araminta Eyre, Faraaz Hamza, Sharon Wallis and Sumita Ghosh from the Bank of England.

The Chair welcomed alternate Emily Martin (Bank of England).

The Chair noted apologies from Andrew Batchelor (LCH), Andrew Grice (Bank of England), Fiona Maria O’Riordan (Citi) and Gavin Platman (Insight Investment).

Item 2 – Minutes of the June Meeting, feedback from the June Main FXJSC Committee meeting, Committee composition and Terms of Reference

The minutes from the 19 June 2024 meeting were agreed by Committee members. The Chair provided an overview of the June Main Committee meeting^{footnote [1]}, noting there had been an update on the transition to T+1 securities settlement in North America which had taken place at the end of May 2024. The Main Committee had also discussed FX market structure developments, including the effect of reduced levels of spot activity on over-the-counter primary venues relative to that in the FX futures market.

The Chair noted that the updated Terms of Reference had been shared with members after the June meeting and would be published following the September Main Committee meeting.

The Chair discussed the current composition of the committee and highlighted recent efforts to adopt more buy-side representation.

Item 3 – Meeting Varied People Update

Araminta Eyre, Faraaz Hamza and Sumita Ghosh from the Bank of England provided an overview of the Bank of England’s Meeting Varied People (MVP) initiative.

The MVP initiative was launched in 2021^{footnote [2]} to encourage diversity in the Bank of England’s Market Intelligence (MI) contacts, and the networks that the Bank engages with. Ms Ghosh explained that MVP had also been embedded in the Bank’s Money Markets Committee and FXJSC.

Committee members discussed some of the challenges they had experienced in attracting diverse talent and highlighted initiatives aimed at improving diversity within their own firms. Ms Ghosh provided insights on initiatives members could foster, in order to help drive diversity within their firms and across the industry.

Item 4 – 3-month forward event review

The committee discussed notable events upcoming over the next quarter which could impact FX operations. Committee members noted potential volatility around the US election. In preparation firms would implement heightened monitoring of systems and technology, to mitigate operational risk. Members also discussed the possibility of bolstering operations teams to provide increased coverage during US trading hours.

Item 5 – Update on FX Global Code and FX Settlement Survey

Natalie Lovell (Bank of England) provided an update on the 3-year review of the FX Global Code (the Code). Ms Lovell summarised the proposed changes to the Code which were focused on mitigating FX Settlement Risk and improving FX data transparency. It was noted that a public consultation on the proposed updates to the Code would commence in early October.

Ms Lovell also provided a brief update on the FX settlement survey. It was noted that the October 2024 survey round would provide a further opportunity for central banks to adopt the new approach for collecting FX Settlement data ahead of the 2025 BIS Triennial survey. ^{footnote [3]}

Item 6 – Update on FX Settlement Crisis Playbook

Kerry Peacock (Deputy Chair – MUFG) gave an update on the FX Settlement Crisis Playbook. An updated draft version of the playbook had been shared with members prior to the meeting. Members agreed to review the Playbook within their firms.

Item 7 – Update on move to T+1 securities settlement in North America

Following previous discussions on the transition to T+1 securities settlement in North America, the Chair asked members if they had experienced any issues. Committee members noted that no significant issues continue to be observed following the transition.

Item 8 – Discussion on operational incidents and SIMEX 24

Sharon Wallis (Bank of England) opened the discussion on the 19 July Crowdstrike incident, which affected systems running Windows 10 & 11. Ms Wallis noted how the incident demonstrates how third-party incidents could materialise into systemic disruption for the sector and the need for the sector to have the right mechanisms in place to respond effectively to such incidents. Members discussed how overall the incident did not cause a significant impact to UK operations within their firms.

Ms Wallis also provided an update on the SIMEX 24 exercise which was due to take place on 1 October and would consider how the financial sector would respond in the case of a major operational disruption that would require a total shut down and restart of the sector. The FXJSC Operations Sub-Committee was due to take part in the exercise as one of the Sector Response Groups.

Item 9 – CLS Update

John Hagon (CLS) noted that CLS Settlement volumes and values had continued to outperform projections. Mr Hagon also provided an update on CLS’ Alternative Processing Site (APS).

Mr Hagon highlighted that CLS would issue an update on the impact of the move to T+1 securities settlement in North America.

Item 10 – GFXD Update

Steve Forrest (UBS) noted that the GFXD FX Operations Committee had discussed FX settlement risk and how the industry can increase the adoption of Payment Versus Payment settlement.

Non-Deliverable Forwards (NDFs) were discussed, including the variation across the FX market in how NDF trades were confirmed. The group had formed a workstream on ‘pain points’ in FX operations, with the inefficiency of chasing unconfirmed trades a point of discussion. Mr Forrest noted that the group also considered the Future of FX, with a backward-looking task to be carried out, which would analyse how many of the expected trends in the FX market have materialised.

Item 11 – FCA Update

Oliver McCausland (FCA) noted that the FCA had been participating as an observer on the UK’s Accelerated Settlement Task Force Technical Group. Mr McCausland highlighted that the group would consult the market with its draft recommendations and hold an industry event in October 2024 to discuss the recommendations.

Item 12 – Any other business

The Chair noted that the next meeting will be held at the Bank of England on 20 November 2024. Members were invited to host the March 2025 meeting.

Attendees

Aaron Mills – Citadel

Alex Chow – Investment Association

Anna Chadderton – Goldman Sachs

Claire Forster-Lee – Morgan Stanley

Daniel Hoye – Natwest Markets

Gail Smith (Deputy Chair) – RBC Capital Markets

James Kaye (Chair) – HSBC

Joe Halberstadt - SWIFT

John Hagon – CLS

Kerry Peacock (Deputy Chair) – MUFG

Mark Codling – Deutsche Bank

Oliver McCausland – FCA

Steve Forrest – UBS

FXJSC Secretariat

Eleanor Garrett – Bank of England

Joe Hanrahan – Bank of England

Matthew Hartley (Legal Representative) – Bank of England

Natalie Lovell – Bank of England

Alternates

Emily Martin – Bank of England

Guest attendees

Paula Kenee – Northern Trust

Nikki Woodley – Northern Trust

Nimit Jobanputra – Deutsche Bank

Lorraine O’Donnell – UK Finance

Aparna Shrivastava - Morgan Stanley

Sumita Ghosh – Bank of England

Araminta Eyre – Bank of England

Faraaz Hamza – Bank of England

Sharon Wallis – Bank of England

Apologies

Andrew Batchelor – LCH

Andrew Grice – Bank of England

Fiona O’Riordan – Citi

Gavin Platman – Insight Investment