Minutes of the London FXJSC Operations Sub-Committee Meeting - 10 March 2022

The Bank of England chairs the London Foreign Exchange Joint Standing Committee (FXJSC) Operations Sub-Committee. The FXJSC is made up of market participants, infrastructure providers and the UK financial regulators.
Published on 10 June 2022

Date of meeting: 10 March 2022

Time: 2pm – 5pm | Location: Videoconference


Minute 1 – Welcome and Apologies

John Blythe (Chair, Goldman Sachs) welcomed members to the FXJSC Operations Sub-committee meeting held via video conference. Mr Blythe welcomed guest presenters Alexander Hutton, Charlie Warburton, Nick Singh (Bank of England), Jeremy Smart (XTX Markets), Kevin Kimmel (Citadel), Sally Pearson (CLS), and Lewis Ide (SWIFT).

Minute 2 – Minutes of the 17 November meeting

The minutes of the 17 November 2021 meeting were agreed, with no comments raised by members.

Minute 3 – SWIFT Update

Lewis Ide (SWIFT- Head of UK & Ireland) presented to members on the institution’s response to implications of the Russian invasion of Ukraine. Mr Ide explained that SWIFT was a neutral entity acting in the interest of its members. He emphasised that sanction decisions rested with governing bodies with whose rules SWIFT complies. SWIFT have complied with EU sanctions to disconnect certain Russian and Belarusian banks from network. The first set of 14 Bank Identifier Codes were due for disconnection from the SWIFT network on 12 March 2022.

Mr Ide noted the sensitivity of the issue given the requirements to comply with regulations including GDPR, but it was noted that SWIFT were closely monitoring the situation. The discontinuation of SWIFT services on the selected entities was no guarantee that these banks would not process payments, as SWIFT was just a messaging service among various alternatives.

Members enquired about SWIFT’s approach in managing these dynamic developments including how they are communicating developments to members. Mr Ide explained that the institution is regularly updating its FAQ section on its website with the relevant information. From a technical perspective, the institution would use MT999s to communicate disconnections where applicable.

Minute 4 – FXJSC Turnover Survey Results

Nick Singh, Alexander Hutton and Charlie Warburton (Bank of England) presented updates on the October 2021 FXJSC Turnover survey results. Overall, average daily reported UK FX turnover was $2.76 trillion relative to a record high of $2.95 trillion in April 2021 (previous survey), representing a 6% decrease, but a year-on-year increase of 7% relative to $2.58 trillion in October 2020. This was primarily caused by falls in turnover for FX swaps and FX spot instruments. FX swap turnover fell 6% from the April 2021, whilst FX spot turnover fell by 9% over the same period. 

The decrease in major currency pairs included EUR/USD turnover, where turnover decreased to $769 billion, down 15% relative to April 2021. This was consistent with most other major currency pairs, such as USD/JPY which decreased from $347 billion in April 2021 to $290 billion in October 2021, a 17% decrease. GBP currency pairs in the top 9 currency pairs however saw increases in turnover, with increases in the EUR/GBP and USD/GBP increasing by 4% and 13% respectively and relative to April 2021.  The EUR/USD was by far the most traded pair, followed by USD/GBP and the USD/JPY.

Overall, daily average GBP FX turnover rose 11% on survey to survey basis, equivalent to a $53 billion increase, from $494 billion in April to $547 billion in October 2021 primarily resulting from outright forwards and FX swaps. Increases in USD/GBP and EUR/GBP FX turnover were the primary drivers behind the increase in GBP FX turnover. The number of trades was relatively flat on a survey on survey basis, but average trade value decreased over the survey period.

The presenters indicated that from April 2022, a new set of questions on FX settlement risk would form part of the survey, with results expected in October 2022. This proposal had the support of the BIS among other institutions. The addition of these questions forms part of an ongoing effort to achieve better alignment with jurisdictions such as New York and Singapore. These proposed changes had been communicated to reporting dealers together with the reporting guidelines with opportunity for any questions or changes to internal data provisions. The Committee agreed the additional data request would potentially provide an opportunity for better view of FX settlement risk. Additional benefits resulting from the settlement risk additions could include increased adoption of the FX Global Code  and enhancing the overall assessment of its effectiveness.

Minute 5 – Current FX Market Conditions

Jeremy Smart (XTX Markets) presented on FX market liquidity conditions. Liquidity on Chicago Mercantile Exchange (CME) Futures as measured by top of book spread, depth of book, and traded volume was higher than that of Electronic Broking Services (EBS)/Reuters Spot venues. Trading volume on CME Futures exceed Primary Spot market by a ratio of 2.5:1 which has so far remained consisted through the year although a significant amount of trading on the over the counter is still anticipated. The pros of trading futures over spot are becoming apparent resulting from opportunities to deal smaller notional contract size, centralised collateral or margin model, which have created wider accessibility to users. It was also noted that non-banks are now becoming key elements in price formation, where historically this has been led by banks. The interbank market in USDTRY remains dysfunctional largely resulting from bilateral creditworthiness of local Turkish banks. USDRUB market is effectively frozen following the Russia and Ukraine conflict.

On the NDF front, interbank liquidity was beginning to fragment as more Electronic Communication Networks allow NDF trading on their platform and some clients demanding access to more diverse pool of liquidity from the banks. Clients have faced challenges accessing best possible process from Liquidity Providers (LPs) because of regulatory reporting requirements. A centralised clearing model would benefit clients by providing access to a more diverse pool of LPs. Although some clients had probed about the possibility of USDRUB NDF, this feasibility is remote given the role by Russian Central Bank in providing the rate. The Latin America (LATAM) region (excluding Brazil) remains a relatively a voice broker market, but future developments towards electronic solutions are likely.

Algorithm/agency is growing driven by the increased volatility in markets. Peer-to-peer is a growing area of interest amongst the buy-side community with majority of bank algorithms now offering clients the ability to 'net' against opposing interest, but still a small percentage relative to overall traded volumes. FX Swap market has become a critical component of robust spot market liquidity but remains highly voice driven and appears to be ready for the move to electronic settlement. This move would be subject to an appropriate deliverable clearing house solution, which would allow swaps to move to an electronic market place. The guidance by GFXC and clarity provided by the FCA surrounding the usage of additional hold times during the last look window has seen a lot of change to move to a zero-hold time settings. Clients have not reported a widening of spreads, contrary to some LPs expressions.

On Market liquidity, this was generally becoming more volatile in 2022 relative to 2021, potentially resulting from greater volatility in the overall market. A number of currency pairs were performing below their 95th percentile; with the worst hit being USD/RUB. G7 currencies had better liquidity showing, but emerging markets currencies had weaker performance. There were improvements in EUR/USD, USD/YEN and USD/CHF, potentially resulting from demand for low risk. Market structure was a key determinant for strong liquidity resulting from high capital velocity, where good liquidity is a function of high capital velocity. The biggest friction in the market was bilateral credit in turn affecting liquidity levels, by restricting clients from accessing the optimal liquidity levels. The market had not fully understood the exposure resulting from the shift in risk from the sell side to buy side with the possibility that there would be more currency risk exposures to clients than they understood.

Members observed that there was tangible difference between the front office and back office, with the front office being ahead from a transformation perspective. This largely results from individual firm investments in front office relative to underinvestment in back office infrastructure. The committee also cited the lag in real-time settlement; for instance spot FX deals as an example of under investment in back office processes.

Members discussed other development areas like block chain technology. The consensus was that it would better to address these issues including other areas like collateral, standardisation of processes including deal settlements, general adoption of new technology and other relevant points through a central approach like a taskforce. This is primarily to help overcome commercial constraints in the implementation of the required change.

Kevin Kimmel (Citadel) updated on the latest market conditions. He stated that FX volatility was elevated, although not as high as at the start of the COVID-19 pandemic. On spreads, EUR/USD and USD/GBP held strong regaining normal levels resulting partly from recovery following the start of the Russia Ukraine conflict.

The emerging markets as represented by Turkey in the USD/TRY pair had widening spread consistent with TRY’s historical performance, although this was lower than November levels where the reaction to Turkish central bank interest rate policy discussion resulted in higher spreads. The USD/RUB had elevated spreads mainly from the difficulty in trading in RUB, as a result of limited liquidity, and heightened counterparty risk. The greatest risk in the RUB pairing is settlement risk. There could be potential for NDF market in RUB in the long term although it remains to be seen how this would evolve. Volumes remained elevated in March 2022 but not as high as at start of the Russia- Ukraine conflict in February 2022. Liquidity in all major currencies had generally held up well despite the conflict.

Minute 6 – CLS Update

Andrew Cooper (CLS) explained that CLS did not settle the Ruble (RUB) and does not have any Russian Settlement Members.  CLS’s focus is the indirect exposures and the compliance with regulators’ requirements and timely reactions to relevant sanctions. On CLS Net Service, CLS was still netting RUB in the meantime within sanctions restrictions. CLS had heightened its internal monitoring, and extended this externally, considering key players like central banks and messaging providers like SWIFT.  Daily average volumes were 1.2 million transactions in 2021 whilst settling $6 trillion in value on a daily basis. These volumes have gone up, and as at March, CLS was settling 1.7 million transactions daily with values averaging about $7.2 trillion, without any strain on performance quality of CLS.  CLS was exploring settlement solutions that can accommodate currencies not currently on their settlement platform.

Minute 7 – FCA Regulatory Update

Alan Barnes (FCA) provided two updates to members on Russia – Ukraine conflict and HMT’s wholesale market review plans.

The FCA continues to monitor developments in the Russia invasion of Ukraine with respect to applicable impact from sanctions on institutions.  The FCA has been engaging with trading venues and firms albeit a particular focus has been on the commodities market. 

The FCA noted that HMT had announced their wholesale market review plans which includes various changes to MiFID arrangements, such as applying a more proportionate pre and post trade transparency regime.

Minute 8 – Education & Outreach

i. UK Finance Update

Andrew Rogan (UK Finance) updated members on a recent impact assessment following the announcement to disconnect with some Russian and Belarusian institutions, as well as engaging with members to understand the effects of the sanctions.

Mr Rogan noted that the end of March 2022 would mark the first year since the operations reliance supervisory guidelines came into effect. Member institutions are expected to demonstrate implementation of the supervisory statement through self-assessments.

UK Finance shared the results of the 2021 benchmark survey with the regulators. This was a 2021 survey on operational resilience implementation by firms.

ii. Operational Manager’s Working Group (OMWG) Update

Juna Nashi (Citadel) provided an update on discussions at the recent Operational Manager’s Working Group (OMWG). The working group discussed settlement of US securities and how positions on sanctioned firms can be unwound to limit their impact on the broader FX market. There was also a discussion following an update from SWIFT and the developments following the Russian invasion of Ukraine. In relation to CLS, the working group discussed the implementation of the CLS net service and generally getting wider adoption from the market, to address FX trades settling outside of the CLS settlement service.

Minute 9 – Any Other Business

Next FXJSC Meeting: Tuesday 7 June 2022


Adam Jukes – Deutsche Bank
Alan Barnes (Alternate) – FCA
Andrew Cooper (Alternate) – CLS
Andrew Grice – Bank of England
Andrew Rogan – UK Finance
Boyd Winston – JP Morgan
Claire Forster-Lee – Morgan Stanley
Gail Smith – RBC
Gavin Platman (Deputy Chair) – Insight Investment
James Kaye – HSBC
Joe Halberstadt – SWIFT
John Blythe (Chair) – Goldman Sachs
Juna Nashi – Citadel
Kerry Peacock (Deputy Chair) – MUFG
Mike Irwin – XTX Markets
Sharon Chapman – Barclays
Steve Forrest – UBS
Terri Van Praagh – Northern Trust

FXJSC Secretariat

Alice Hobday – Bank of England
Matthew Hartley (Legal representative) – Bank of England
Ouadi Belayate – Bank of England
Sita Mistry – Bank of England
Timothy Mukopi – Bank of England

Guest attendees

Alexander Hutton – Bank of England
Charlie Warburton – Bank of England
Jeremy Smart – XTX Markets
Kevin Kimmel – Citadel
Lewis Ide – SWIFT
Nick Singh – Bank of England
Sally Pearson – CLS


John Hagon – CLS