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Table of Contents
                            The Model Code
Contents
Foreword
Disclaimer
The Model Code: Introduction
	Background
	The need for one Model Code
	Scope and importance
	Preparation
	Dealing terminology
	Compliance
	Adherence
	Structure
	Updates and revisions
	Expert Determination Service
	Translation/language
The Model Code
	PART I: BUSINESS HOURS
		Chapter One – Market Business Hours
			1. Market Opening and Closing Hours
			2. Holidays
			3. Market Disruption
	PART II: COMPANY WIDE ISSUES
		Chapter Two - Personal Conduct
			4. General Personal Conduct
			5. Drugs, Alcohol and Substance Abuse
			6. Gambling/Betting between Market Participants
			7. Entertainment and Gifts
			8. Dealing for Personal or Proprietary Accounts
			9. Misinformation and Rumours
			10. Confidentiality
			10.1. Distribution of Confidential Information
			10.2. Use of Confidential Information
			10.3. Insider Dealing
			11. Customer Relationships, Advice and Liability
		Chapter Three - Setup
			12. Segregation of Duties
			12.1. Segregation of Duties and Reporting Lines
			12.2. Independent Risk Controls
			13. Terms and Documentation
	PART III: THE FRONT OFFICE
		Chapter Four – Dealers, Sales and the Dealing room
			14. Relationship between Broker/Dealer
			15. Role of Dealers and Sales
			16. Differences between Principals
			17. After-Hours and Off-Premises Dealing
			18. Dealing Room Security
			19. Retaining Phone Conversations and Electronic Messages
			20. Dealing With Unidentified/Unnamed Principles
			21.  Authorisation and Responsibility for Dealing Activity
			22. Dealing at Non-Current Rates and Rollovers
			23. Dealing Quotations, Firmness, Qualification and Reference
			24.  Dealing Reciprocity in relevant markets
			25. Use of Foreign Exchange Dark Pools in Trading
			26.  Stop/loss orders
			27. FX Benchmark Orders
			27.1. Execution of Orders
			27.2. Treatment of FX Benchmark Orders
			28. Position Parking
			29. Rate setting
			30. Market Manipulation
			31. Disclosure (Conflicts of Interest)
		Chapter Five - Dealing Through Brokers (Voice Brokers and Electronic Broking Platforms)
			32. Differences between Brokers and Principals
			33. Differences between Prime Brokers and Customers
			34.  Qualifying and Preliminary Dealing Procedure
			35. Consummation of a Deal between Dealers and Brokers
			36. Commission in Broking (including electronic broking platforms)
			37. Passing of Names
			38. Name Substitution
		Chapter SIX - Dealing Practice for Specific Transactions
			39. Deals using a ‘Connected Broker’
			40. Assignments and Transfers
			41. Repos and Stock Lending
	PART IV: THE MIDDLE OFFICE
		Chapter Seven - Middle Office Practice
			42. Trade Surveillance
			42.1. Prevention of missed, failed or erroneous entries
			42.2. Artificial market and market manipulation
			42.3.  Detection of market manipulation
			43. Internal Review
			44. Mark-to-Market Best Practices
		Chapter Eight - Prime Brokers
			45. Confidentiality with regard to Prime Brokers
			46. Disputes with Prime Brokers
			47. Reputational Risks for Prime Brokers
			48. Operational Risks with Prime Brokers
			49.  Credit Risks with Prime Brokers
			50.  Post-Trade Life Cycle Events with Prime Brokers
		Chapter Nine - Disputes, Complaints and Claims
			51. Disputes and Mediation
			52. Compliance and Complaints
			53. Settlement Claims
			53.1. Undue Enrichment
			53.2. Minimum Threshold
			53.3. Time frame for Claims and Processing
	PART V: THE BACK OFFICE
		Chapter Ten - General Setup
			54. Core Competencies
			55. Operational Risk Awareness
			56. Globally Consistent Processing Standards
			57. Participation in the Professional Community
			58. Contact Lists
			59. Escalation Procedures
			60. Regular Business Partner Meetings
			61. New Business
			62. Segregation of Funds
			63. Preparation and Communication in Crisis Situations
			63.1. Preparation for Crisis Situations
			63.2. Communication in Crisis Situations
			63.3. Existence of Business Continuity Planning (BCP)
			64. Calculation Methodology for Claims
			64.1. Communication of Claims
			65. Reconciliations
			65.1. Importance of Account Reconciliations
			65.2. Regular Reconciliations
			65.3. Timely Investigation and Clarification
			65.4. Segregation of Duties
			66.  Discrepancies and Investigations
			66.1. Non-receipt of Funds
			66.2. Settlement Discrepancy
			66.3. Communication
		Chapter Eleven - Control
			67. General Controls
			67.1. Counterparty Identification
			67.2. Retaining Transaction Records
			67.3. Amendments to Transaction Details
			67.4. Operational Performance Indicators
			67.5. System Access
			68. Standard Settlement Instruction (SSI):
			68.1. Having a separate/independent SSI Team
			68.2. SSI Usage
			68.3. Exchange of SSIs
			68.4. Controls and Archiving Logic around SSIs
			68.5. Changing SSI with regards to the Period of Notice and for Outstanding Trades
			68.6. Single changes to default SSIs
		Chapter Twelve - Post-Trade Standards and Practices
			69. Confirmation of Trades
			69.1. Responsibility
			69.2. Segregation of duty
			69.3.  Buy Side
			69.4. All trades should be confirmed
			69.5. Sending
			69.6. Receiving and Matching of Trades
			69.7. Technical Means
			69.8. Unconfirmed Trades
			69.9. Broker Trades
			69.10. Legal Aspects
			69.11. Market Conventions
			69.12. Review of Amendments
			70. Reporting of trades
			71. Netting
			71.1. Establish Netting Agreement
			71.2. Automated Netting
			72. Settlements:
			72.1.  Industry Best Practice for Prompt and Accurate Settlement
			72.1.1.  New Customer Relationship – Account Workflow (AW)
			72.1.2. Straight Through Processing (STP)
			72.2. Industry Best Practice for Settlement Procedures and Controls around Cut off Times
			72.2.1. Know your Trade
			72.2.2. Know your Customers and your Stakeholders
			72.2.3. Fast turnaround time/Responsiveness to Changes
			72.3. Industry Best Practice for Settlement Communication with Nostro Banks
			72.3.1. Send Electronic Messages for Expected Receipts
			72.3.2. Use Real-time links to process Cancellation and Amendment of Payment Instructions
			72.4. Industry Best Practice for Settlement Controls where Beneficiary is a Third party
			72.4.1. Know your Beneficiary and Third Party
			72.4.2. Know your Contractual Beneficiary’s Subsidiaries
			72.5. Industry Best Practice for Settlement with regards to CLS Usage, CLS Deal Input, CLS Rescinds
			72.5.1. Expansion of CLS Usage
			72.5.2. Market Makers as CLS Members or Third Parties
			72.5.3. CLS Deal Input and Matching
			72.5.4. CLS Rescinds
			73. Performance and Capacity Management in FX Processing
			73.1. Technical and Operational Capability
			73.2. Clearly defined Capacity and Performance Management processes should be in place.
			73.3. Defined Mechanisms in place to respond to extreme changes in demand
			74. Customer Costs and Charges
	PART VI: USE OF TECHNOLOGY AND GENERAL SECURITY
		Chapter Thirteen - Security
			75. Fraud
			76. Money Laundering and Terrorist Financing
		Chapter Fourteen - Use of Technology
			77. Use of Mobile Phones
			78. Electronic/Online Trading and Broking:
			78.1. E-trading process according to market standards
			78.2. Electronic broking process according to market standards
			78.3. Access to systems
			78.4. Terms of engagement
			78.5. Legal status of all potential counterparties
			78.6. Pricing and Trading Behaviour
			78.7. Aggregation services
			78.8. Fully Trained Risk officers
			78.9. Liquidity providers should be cognisant of reputational risks
			78.10. Contingency
			78.11. Archiving
			78.12. Time stamps on e-trading
			78.13. Process for the swift resolution of disputes
			78.14. Process outlining procedures
			78.15. Institutions acting as Prime Brokers
			78.16. Human Oversight
			78.17. Maintenance of Front and Middle Office contacts
			78.18. Third Party Access to liquidity venues
			78.19. Trading and broking ethics through the use of technology
			79.  E-trading Safeguards
			79.1. Prevention of rogue trades
			79.2. The prevention of other technical errors:
			79.2.1.  Pre-Trade Risk Limits
			79.2.2. Price Collars
			79.2.3. Fat-Finger Quantity Limits
			79.2.4. Repeated Automated Execution Throttle
			79.2.5. Outbound Message Rate
			79.2.6. Regulation of ‘last look’ Practices
			79.2.7. Kill Button
			79.3.  Regulating the Use of High Frequency Algorithmic Trading
			79.3.1. Signals of Possible Market Manipulation in an Automated Trading Environment
Supplementary Material
	PART I: BUSINESS HOURS
		Chapter One – Market Business Hours
	PART II: COMPANY WIDE ISSUES
		Chapter Two - Personal Conduct
		Chapter Three - Setup
	PART III: THE FRONT OFFICE:
		Chapter Three - Dealers and Dealing Room
		Chapter Four - Dealing Through Brokers (Voice Brokers and Electronic Broking Platforms)
		Chapter Five - Dealing Practice for Specific Transactions
	PART IV: THE MIDDLE OFFICE
		Chapter Six - Middle Office Practice
		Chapter Seven - Prime Brokers
		Chapter Eight - Disputes, Complaints and Claims
	PART V: THE BACK OFFICE
		Chapter Ten - Control
		Chapter Eleven - Post-Trade Standards and Practices:
	PART VI: USE OF TECHNOLOGY AND GENERAL SECURITY
		Chapter Twelve - Security
		Chapter Thirteen - Use of Technology
Key Terminology
	The Importance of Terminology:
	PART I: BUSINESS HOURS
	PART II: COMPANY WIDE ISSUES
	PART III: THE FRONT OFFICE:
	PART IV: THE MIDDLE OFFICE
	PART V: THE BACK OFFICE
	PART VI: USE OF TECHNOLOGY AND GENERAL SECURITY
APPENDICES
	Appendix I - General Risk Management Principles for a Dealing Business
	Appendix II - ACI Rules for Over the Counter Financial Instruments Dispute Resolution
	Appendix III - ALM Best Practices
	Appendix IV - Markets and Instruments covered by The Model Code
	Appendix V - Terms and Conditions for Financial Instruments
	Appendix VI - Other Published Codes of Conduct and Approval for Translating
	Appendix VII - The Charter of ACI - The Financial Markets Association
	Appendix VIII - Main SWIFT Currency Codes / as of 1.1.2013
	Appendix IX - The Euro
	Appendix X - Past Introductions to The Model Code and Past Acknowledgements
                        
Document Text Contents
Page 1

The International Code of Conduct &
Practice for the Financial Markets

ACI – The Financial Markets Association

Copyright ©2000-2015 ACI - The Financial Markets Association.

The

Model

Code

Version February 2015

Note to users: this version may not be the most recent version as
The Model Code is regularly updated. To ensure you are using the
latest version, we recommend you register on www.acifma.com to
be notified immediately when updates to The Model Code are
published.

http://www.acifma.com/

Page 2

The Model Code


The Model Code

The Model Code (‘Model Code’) is designed to have global application in the over-the-counter
(OTC) professional financial markets. Its scope is wide-ranging, and the diversity of markets and
products now traded (and arbitraged) by bank Dealers dictates inevitably that there will be some
areas of overlap where separate individual and local market codes exist already. The contents of
The Model Code are therefore, to a certain extent, generic.

The Model Code is a globally accepted minimum standard of conduct. No matter how detailed and
specific local rules and regulations may be, the underlying principles of those rules and
regulations can be found in The Model Code. This is why The Model Code is accepted and/or
endorsed by many regulators that, in their own jurisdictions, apply and implement more detailed
rules and regulations.

Readers should consult local compliance departments and/or counsel (internal or external) on the
specific requirements and conditions that apply to a particular transaction or business conduct.
The details and intricate legal and regulatory requirements of one jurisdiction may apply only
where there is a personal and/or subject matter connected to that jurisdiction. Where such laws,
rules and regulations do not apply, or where the nexus necessary for the application is not free
from doubt, The Model Code provides a good starting point.

The Model Code is consistent with the high standards of integrity and professionalism that exist in
the core financial markets. The first ACI-The Financial Markets Association Code of Conduct was
published in 1975 and has been recognised consistently since as the only global Code of Conduct
in existence, most recently by the FSB1.



1 Financial Stability Board - www.financialstabilityboard.org

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The Model Code
PART V: The Back Office

Chapter Twelve – Post Trade Standards and Practice


• Aggregated information regarding costs and charges should be provided to Customers
(and potential Customers) within a reasonable time before the provision of the service in
order to allow enough time to consider material information in order to make the decision
to trade.

• Firms should ensure that costs and charges provided to Customers are representative of
the costs that will actually be incurred (or a reasonable estimation thereof).

• When providing services, institutions should be obligated to provide Customers with a
representation of the cumulative effect of costs on potential returns and the effect of the
overall costs and charges on the return of the transaction.

• Brokers should execute a trade immediately that it is placed by a Customer and should
not delay execution in anticipation of a market movement.

• Brokers should take care to ensure that the best possible rate is obtained for all
Customers in their execution of all trades.

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Page 86

The Model Code
PART VI: Use of Technology And General Security

Chapter Thirteen - Security


PART VI: USE OF TECHNOLOGY AND GENERAL SECURITY

Chapter Thirteen - Security

75. Fraud

• There are many ways in which an institution might be defrauded. As such, great vigilance is
required by Management and staff, and particularly in respect of calls received on an ordinary
telephone line (typically in Principal to Principal transactions).

• As a safeguard against fraud, it is strongly recommended that the details of all telephone deals
(which do not include pre-agreed standard settlement instructions) should be confirmed in
writing by the recipient of the call, seeking confirmation to ensure that the deal is genuine.

• Particular care should be taken to check authenticity where the beneficiary is a third party (or
anyone other than the transaction counterparty). It is common to allow this activity only with
specific Management approval.

• In the event of any suspicious circumstances, staff must notify Management without delay.

76. Money Laundering and Terrorist Financing

Banks and their employees have a duty to prevent money laundering and terrorist financing
and report any knowledge or suspicion of such acts to the appropriate authority. Institutions
and individuals face severe penalties if they fail to take reasonable steps to fulfill these
obligations and thereby facilitate such transactions, even if this is done unknowingly. Banks
are also exposed to serious reputational risk.

• Firms must have clearly documented policies and procedures, and strong systems and
controls, to avoid being exploited for the purposes of money laundering and terrorist
financing.

• Firms must ensure that, where any member of staff has any knowledge or suspicion of these
activities or reasonable grounds for suspicion, this knowledge or suspicion is promptly
reported by the firm to the responsible public authority.

• Firms must ensure that someone should be clearly designated to whom all staff have easy,
direct and confidential access and who has similar access to that of senior Management and
the responsible public authority in order to pass on reports of transactions where there is clear
evidence of, or reason for suspecting money laundering or terrorist financing. This person
typically should be the Compliance Officer (note that staff should report to the compliance
officer, not to the responsible public authority; it is the compliance officer who should report to
the responsible public authority). Further, “Know your Customer” information should be

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Page 169

Appendices
Appendix X

Past Introductions to the Model Code and Past Acknowledgements




All the evidence over the past two years suggests that The Model Code is gradually fulfilling this
critical role throughout the currently 66 countries in which ACI has affiliated national associations.
I am pleased to commend this second edition to all dealing, administrative, control, audit,
accounting, compliance and management personnel amongst the participants in our markets.



The Model Code is also one of the important cornerstones and training aids for all market
professionals and a comprehensive knowledge and insight into the letter and the spirit of The
Model Code is a compulsory requisite of ACI’s examination suite. It is considered imperative that
both new entrants and experienced dealing professionals should gain valuable guidance as to the
best market practice and personal conduct issues, applicable in the over-the-counter markets.



About the author: Denis J. Nolan

Denis Nolan was a well-known market practitioner with over 30 years’ experience in the
global foreign exchange, money and derivatives markets.

As a chief Dealer and treasurer throughout the 1970s and 1980s, he was amongst the very first
treasurers of international financial institutions to embrace financial futures and derivatives
as a logical extension of money and exchange dealing strategies.

A founder member of LIFFE and former visiting lecturer at The City University Business School
London, he wrote extensively on foreign exchange and addressed conferences and seminars
on financial markets’ instruments, derivatives, arbitrage, back office and Code of Conduct in
Europe, the USA, the Middle East and Japan. He was co-author of Mastering Treasury Office
Operations published by Pearson Education in 2001.

When the Code of Conduct was first included as a compulsory subject in the examinations,
he was approached by ACI–The Financial Markets Association to advise on related issues.
With a unique training background and as an internationally recognised expert on the
subject, he was commissioned in December 1998 to write a global code of conduct for
treasury OTC financial markets.

Liaising closely with the ACI Committee for Professionalism and maintaining ongoing contact
with the regulatory authorities in Europe, USA and Japan, he completed The Model Code in
March of 2000.

Sadly, Denis passed away in July 2003 following a long battle with cancer. However, he leaves
behind a long lasting and fitting memorial to his contribution to the industry in The Model
Code.

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Appendices
Appendix X

Past Introductions to the Model Code and Past Acknowledgements


Acknowledgements



Eddie Tan

Chairman (1998-2001)

Committee for Professionalism

ACI - The Financial Markets Association

April 2000



The Model Code would not have been possible without the valuable insight, time and effort
afforded us by the following:

• The Central Banks of the various OECD countries

• The Financial Services Authority in the United Kingdom

• The Foreign Exchange Committees in New York, Tokyo and Singapore

• ACI representatives and market participants for the many countries in which ACI -

The Financial Markets Association has a presence.



Last but not least, we would like to thank the author, Denis Nolan of ArbiTrain Ltd for
compiling and editing the various drafts and the final product after the many long, arduous,
but thoroughly productive sessions with the Committee for Professionalism. Denis's
experienced analyses, sense of commitment and meticulous preparation is greatly
appreciated.

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