Minutes of the UK Money Markets Code Sub-Committee – May 2022

The UK Money Markets Code Sub-Committee meets regularly to review and update the UK Money Markets Code.
Published on 08 July 2022

Date: May 2022

Time: 2pm-3.30pm | Location: Bank of England, Moorgate Offices


Item 1 – Introduction and welcome to new members

The Co-Chairs welcomed everyone to the Bank in particular Bola Tobun (London Borough of Enfield), a new member who was unable to attend her first meeting in November 2021.

Item 2 – Minutes of last meeting

The Co-Chairs noted that the minutes of the last meeting had been published on the Bank’s website in January 2022.

Item 3 – Failed Trades: what can the code do to address reported increased levels? (Mike Jones and Christopher Mundy)

Mike Jones and Christopher Mundy gave a short presentation to the Committee highlighting the increase in fails in the gilt repo market against the backdrop of an increase in repo volumes. The temporary extension to the DVP window (up till 3.25pm) and proactively chasing counterparties seems to have led to a slight improvement in ‘fails’, however the level of ‘fails’ are still too high. The Committee felt that there was a need to investigate which type of counterparties are ‘failing’.

On the reasons for fails, these were listed as follows: (i) counterparties in a chain failing thus causing a ripple effect in the market; (ii) low liquidity; (iii) timing; (iv) operational friction and; (vii) the impact of COVID (in terms of staff turnover and the levels of inexperienced staff that this has caused and working from home). The Committee was eager to ‘get to the bottom’ of why fails have increased. Some of the potential solutions discussed were: (i) allowing partial settlement; (ii) encouraging investment in settlement efficiencies; (iii) auto-partialling; (iv) Euroclear’s autoborrow programme; (v) the introduction of fines, which did not receive overwhelming support from the Committee and (vi) monitoring settlement efficiencies.

With regards to partial settlement, the Committee discussed including some wording in the Code on this. The Committee further discussed amending the Explanatory Note of the Code to address the issues of fails in the gilt market.

The Committee also discussed: (i) gathering more information on the impact of auto-partialling; (ii) some evidence around how partialling is being used and; (iii) introducing a ‘Hot Topic section on fails when the Code is next updated.

The Bank noted that it was unhappy to see the current level of fails, particularly in the repo market, and urged all market participants to work together to rectify this. In the Bank’s view it reflected very poorly on the efficiency of the London market although it was noted that fails were also currently a significant problem in many international markets.

The Committee was informed that the settlement window is likely to be extended permanently very soon.

Item 4 – Securities Lending: poor practice reported to have happened around the borrowing of shares for voting purposes/ESG Governance issues

This item was put on the agenda to bring a breach of the Money Market Code to the attention of the Committee. In this case, there was reported to have been borrowing shares (in a transaction conducted by an agent lender) with the view to using the shares acquired to vote in a contested AGM. The Committee was in agreement that this was a breach of the Money Market Code, particularly as the Code clearly states that this type of transaction breaches the Code. There was also a suggestion to socialise this section at conferences.

There was a discussion about whether signatories should be made to re-attest to the Code in a bid to remind signatories of this aspect of the Code. However, it was felt that this would be a backward step in that many current signatories might withdraw until a fresh assessment had been undertaken. Instead, it was agreed that a letter should be written to all signatories of the Code highlighting the issues raised in this meeting alongside any non-substantive changes to the text, and any updates to the Explanatory Note.

Item 5 – Working from home and application of the Code

The Committee felt that it might be appropriate to review the wording in the Code with regards to ‘working from home’ to include ‘hybrid’.

Item 6 – Local Authority Practice and their new Code

Vicky Worsfield and Bola Tobun gave a short presentation on the Prudential Code for Capital Finance for Local Authorities and how this aligns with the UK Money Market Code. Vicky Worsfield covered some of the key changes to Prudential Code and Bola Tobun covered the key changes to the Treasury Code.

Item 7 – Promotion of the Code

The Committee was informed about the difficulties in getting Hedge Funds to sign up to the Code. Two suggestions were put for forward for promoting the code: (i) getting examining bodies to add the Money Market Code to their respective curricula and (ii) getting compliance departments to get market practitioners to attest to having understood the Code.

Committee attendees

Attendees (in person)

Gordon Lowson – Aberdeen Standard Investments

Tim McLeod – Blackrock

Ina Budh-Raja (Co-Chair) – BNY Mellon

Chris Mundy (CM) (invited to give a presentation on fails) – Euroclear

Glenn Handley (Co-Chair) – HSBC

Andy Dyson – ISLA

Mike Jones (MJ) (represented Antony Baldwin and gave a presentation on fails) – LCH

Mark Thomasson – NatWest

Terry Barton – Nationwide

Ryan Wood (invited as part of the D&I initiative) – Nationwide

Bank of England

Jon Pyzer

David Glanville

Kpakpo Brown

Attendees (remotely)

James Winterton – ACT

Vicky Worsfield – Guildford Borough Council

Veronica Iommi – IMMFA

James McKerrow – Insight Investment

Bola Tobun – London Borough of Enfield

Nic Erevik – Newcastle Building Society

Apologies (unable to join due to technical difficulties)

Malvi Ruparelia – Barclays Capital

Alessandro Cozzani – BOFA Merrill Lynch

Jo Whelan – DMO (Observer)

Andy Green – Hoare & Co / LMMA


John Edwards – CME Group

James Eldridge – FCA (Observer)

Oliver Clark – FMSB MTS (Observer)

Andrew Welch – LGIM

Jennifer Keser – Tradeweb

Philip Chilvers – TP ICAP