New Standards for the Foreign Exchange Market
The national foreign exchange market issued the China Foreign Exchange Market Guidelines on May 8，and the move has been hailed as a major reform. It took a page out of the global foreign exchange market standards and is already a symbol of China's foreign exchange market rules complying with the international standards.
As a basic system of self-discipline for China's foreign exchange market，the Guidelines are not legal or regulatory constraints on market participants. But by raising the standards for self-discipline，they help build confidence in the foreign exchange market and in turn help continue the development of the market. In this exclusive interview，China Forex reporter speaks to Chu Guoqiang，director of the Foreign Exchange Trading Unit，Financial Marketing Department，Agricultural Bank of China，Cao Shounian，deputy general manager of the Financial Market Trading Center，China Construction Bank，Xiao Ting，vice president of Financial Market Business Center，Bank of Communications，Yao Zhenhua，director of China Trading，Citibank China，and He Xin，managing director，Societe Generale (China).
China Forex: It has been said that the introduction of the Guidelines is a major initiative in the reform and development of China's foreign exchange market. What would you say is the main significance for China's foreign exchange market?
Chu Guoqiang: In order to enhance fairness in a comprehensive framework for the global foreign exchange market，the Bank for International Settlements (BIS) developed the Global Foreign Exchange Market Guidelines. Since 2015，the People's Bank of China，as a member of the BIS Foreign Exchange Market Best Practices Committee，has participated in the promulgation of the Global Foreign Exchange Market Guidelines. Before the release of the global guidelines，China's foreign exchange market issued its own "China Foreign Exchange Market Standards." This is of great significance to the development of China's foreign exchange market. First，it is conducive to promoting the reform of the exchange rate mechanism for the renminbi. The reform of China's exchange rate formation mechanism is constantly making progress. The stable and orderly foreign exchange market can guarantee the smooth implementation of reform policies and avoid disturbances from "irrational factors." Second，it is conducive to the smooth integration of China's foreign exchange market and the international market. As the world's largest developing country，China has a foreign exchange market with certain emerging market characteristics. The "Guidelines" have drawn on the experience of the more mature international market，and integrated its practices. This is conducive to the stable development of the foreign exchange market. It also advances the internationalization of the renminbi.
Yao Zhenhua: It should be said that guidelines are a milestone in the development of China's foreign exchange market. They have fully absorbed the latest regulatory experience of foreign financial markets. Combined with China's own characteristics，they strengthen banks' internal controls，standardize bank counter business as well as real-time and non-bank counter transactions.
Cao Shounian: The development and the release of the "Guidelines" is an iconic event in the development of China's foreign exchange market. It is a comprehensive summary of China's foreign exchange market development during more than 20 years，which will have a positive effect on the healthy development of China's foreign exchange market over the longer term.
First，the "Guidelines" include 216 articles of conventional practices，general principles，transaction execution methods，transaction confirmation，transaction execution and clearing，brokerage firms and technical terms among other items. It not only contains the industry's guiding principles，provides the normative operation of the best practices and improves the foreign exchange market system with Chinese characteristics. It has a strong guiding significance for the foreign exchange market participants and this is conducive to promoting professionalism as well as fair，efficient and sound market practices.
The "Guidelines" also have relied on the global foreign exchange market standards and the relevant criteria of the self-regulatory mechanisms of the major national and regional foreign exchange markets.
Although the "Guidelines" do not constitute a legal or regulatory constraint on market participants and do not replace regulatory rules，they can effectively complement the relevant national laws，regulations and policy rules. After the implementation of the "Guidelines"，the Chinese foreign exchange market participants and practitioners will be able to regulate themselves through market self-discipline. This has a far-reaching impact.
He Xin: Since the financial crisis of 2007-2008，global financial market regulators have launched investigations into the activities of large foreign institutions in the foreign exchange market. They have imposed heavy fines on Barclays，Deutsche Bank，Royal Bank of Scotland and a number of other banks. A top priority for regulators has been to boost confidence in the fairness and effectiveness of financial markets by restraining foreign exchange manipulation by large institutions in the marketplace and protect small investors and improve market infrastructure. In this context，all foreign exchange markets actively promote the introduction of a detailed code of conduct to regulate the foreign exchange market. In China，the central bank and the foreign exchange regulator took the lead in setting up a professional committee to look at standards of professional conduct and market practice in the foreign exchange market three years ago. The special committee formed the first draft of the Professional Guidance and Market Practice of China's Foreign Exchange Market in 2016，and actively participated in the development and promotion of the first edition of the unified code of conduct of the Foreign Exchange Market Best Practices Committee by BIS. In June 2016，in order to further adapt to the development of China's foreign exchange market，and better to give full play to the role of financial institutions in the market construction，the national foreign exchange market self-regulatory mechanism was established in Shanghai.
Xiao Ting: The promulgation of the "Guidelines" is of huge significance to the development of China's foreign exchange market，as it will promote the healthy and rapid development of the market. At the same time，the "Guidelines" provide general principles and guidelines for the best industry practices for participants and practitioners in the Chinese foreign exchange market. This will help promote a fair，efficient，professional and robust operation of the foreign exchange market. The "Guidelines" are also a useful complement to relevant laws，regulations and policies of the Chinese authorities. This will help market participants improve the internal management system and carry out relevant business with higher standards of professional conduct and operation.
The "Guidelines" are in full compliance with international practice and global guidelines. Therefore，members of the foreign exchange market should be up to speed on the contents of the "Guidelines." They should constantly improve their internal management systems and establish higher compliance standards in line with international norms. This will give overseas institutions confidence in China's standards and thereby accelerate the pace of Chinese banks "going global." This also helps promote the internationalization of the renminbi.
China Forex: What is the scope of the "Guidelines" and how do we promote them.
Yao Zhenhua: The "Guidelines" cover the institutions and individuals approved by the regulatory authorities to engage in foreign exchange transactions. This includes qualified institutions and their staff engaged in the interbank foreign exchange market business，foreign exchange settlement business and foreign currency trading. It not only covers banks，but also the non-bank financial institutions engaged in foreign exchange- related business.
The banks，as a bridge between the customers and the market，have a key role in the promotion and implementation of the "Guidelines." In view of this，the banks should set a good example by providing quality professional services to the market and follow the "Guidelines" regarding their customer transactions. Banks also should have some supervision and control over the behavior of the non-banking institutions and brokerage firms participating in interbank dealings.
Xiao Ting: The "Guidelines" are not only fully integrated with international rules and practice，they also take into consideration the actual situation of China's foreign exchange market. This means that the implementation of the "Guidelines" should be gradual. Training as mapped out in the "Guidelines" should be conducted in batches，starting with core staff members and then expanding to others. It should set a good example through the core members in order to influence all market participants. The "Guidelines" cover the certification of professional qualifications and ultimately cover all aspects of training. They also could improve the evaluation system regarding self-discipline in the market through proper reward and punishment mechanisms. At the same time market participants are urged to put the "Guidelines" into actual practice.
China Forex: From the perspective of customer service，how would the "Guidelines" influence the banks?
Yao Zhenhua: The "Guidelines" have clear and detailed rules regarding transactions with customers. This section helps protect the interests of the clients，regulates the bank's trading behavior and attempts to reduce disputes between banks and their customers. This protects the interests of the bank to a large extent. Standardized trading behavior will promote healthy development of the market accordingly，and all the participants have clear rules to comply with. This is conducive to the formation of an efficient and safe trading environment. This in turn should attract more investors to the market and that will be good for the internationalization of the renminbi.
Cao Shounian: The "Guidelines" have provided common guiding principles and best practices for participants in the Chinese foreign exchange market ¨C both institutions and individuals approved by the regulatory authorities to engage in foreign exchange transactions. This means that all participants in the Chinese foreign exchange market should follow industry principles proposed by the "Guidelines" when providing services to customers. This is conducive to the formation of industry norms and it is also conducive to the implementation of a customer-oriented philosophy，covering trading ideas and the confidentiality of trading information. It should provide customers with more professional services and improv