PH Model Code

• The Philippine Code of Conduct and Market Practices for Treasury Activities (2020)
• Curated and facilitated by


  Roy B. Lacsamana
• Adopting, Adhering, Aligning to the new Foreign Exchange Global Code
• Key Principles


  • 1-3
  • 4-7
  • 8-18
  • 19-23
  • 24-41
  • 42-55
• To provide the requisite training and compulsory certification exam through the Ateneo-BAP Institute of Banking Treasury Certification Program on the behavior and conduct of Treasury market participants to adhere to a moral compass and global set of standards that are universally applicable; and to conform to the local trading conventions covering the individual markets the market participants trade in, focused on the front-office and related dealing functions.
• George Wilhelm Friedrich Hegel, Philosopher: 'Learning is the art of making man ethical'
• Genesis of the PH Model Code as an integral module of the Ateneo-BAP Institute of Banking Treasury Certification Program

  1997

  
• 1st iteration based on The ACI Model Code 2013. as a global minimum standard and BSP Circular No. CL-2010-13: Code of Ethics governing PH Financial Activities as a regulatory framework

  2013
• 2nd iteration: Adopting, Adhering, Aligning to the new Foreign Exchange Global Code (FXGC) and unifying local trading conventions and practices into a single code

  2020
• Post 2020: Next likely iteration: expand coverage of Global Code to other asset classes – FIC, evolving into an FICC Global Code
• Serve as "self-regulating" guidelines for the local ACI-FMA and MART to build on and to adapt, in order to promote efficient practices and market professionalism covering over-the-counter (OTC) foreign exchange, money & capital markets and their select derivatives
• The PH Model Code Module: will enable participants to have both a thorough understanding of the principles as well as their applications, to enable them to understand the expectations on them to promote integrity and effective functioning of the FX markets.
• This program is designed for the following groups

  • Financial market participants across buy side, sell side and intermediary institutions as well as regulators
  • Middle office and operations personnel
  • Compliance and risk officers
• Market Participant generally refers to both firms and personnel. However, in some cases it will be clear that a principle is by its nature more relevant to only one or the other. For example, certain principles deal primarily with business or firm-level policies and procedures rather than individual behaviors.
• Learning Objectives

  • TCP Candidates should be able to recall what they have learned
  • TCP Candidates should be able to demonstrate comprehension on what they have learned
  • TCP Candidates should be able to use what they have learned to achieve positive results
  • TCP Candidates should be able to draw conclusions and make informed decisions
  • TCP Candidates should be able to extract meaning from what they have learned
• Scope


  • LEADING PRINCIPLE I: ETHICS
  • LEADING PRINCIPLE II: GOVERNANCE
  • LEADING PRINCIPLE III: EXECUTION
  • LEADING PRINCIPLE IV: INFORMATION SHARING
  • LEADING PRINCIPLE V: RISK MANAGEMENT & COMPLIANCE
  • LEADING PRINCIPLE VI: CONFIRMATION & SETTLEMENT
• Key Principles 1-3: General Personal Conduct, Drugs, Alcohol and Substance Abuse, Gambling/Betting between Market Participants, Entertainment and Gifts, Dealing for Personal Account
• Key Principles 4-7: A new discipline: Governance, Risk and Compliance, Frameworks, Segregation of duties, Independent Risk Controls
• Key Principles 8-18: Role of Principal/Agent, Stop Loss Orders, Pre-hedging, Market Disruption, Market Data, Mark-up, Confirmation of trades, Name Substitution, Last Look, Algo execution, aggregation, Customer Relationship, Advice and Liability, Business Hours, Dealing Room Security, Retaining Phone Conversations and Electronic Messages, Authorization and Responsibility for Dealing Activity, Dealing at Non-Current Rates and Rollovers, Dealing Quotations, Firmness, Qualification and Reference, Dealing Reciprocity in the Relevant Markets, Position Parking, Rate Setting, Differences Between Brokers and Principals, Qualifying and Preliminary Dealing Procedures, Consummation of a Deal, Commission on Broking, Passing of Names
• Key Principles 19-23: Confidentiality, Misinformation and Rumors
• Key Principles 24-41: General Risk Management Principles, Enterprise Risk Management
• Key Principles 42-55: Confirmation of Trades, Netting, Settlements, Terms and Documentation, Fraud
• Key Market Terminology Glossary of Terms
• ILLUSTRATIVE EXAMPLES TCP learners think through the examples that will help them further understand the underlying principles and related principles. The examples go to the next step to bring the principles and the practices to life. The examples are intended to illustrate the FXGC principles and situations in which the principles could apply. They are not intended as, nor should be interpreted as, prescriptive or comprehensive guidance.
• Mission Statement: To be a leading, global association of wholesale financial market professionals, contributing to the market development through education, market practices, technical advice and networking events
• Standard of the International Financial Markets in terms of: Maintaining the professional level of competence and the ethical standards, Committing to maintain the highest possible standards in their profession by setting an example of propriety and best ethical behavior in business, Offering global third party certifications
• One of the most important cornerstones and training aids for all market professionals and is a compulsory requisite of ACI's exams
• Covers activities in Spot and Forward FX, Currency Options, Money market instruments, interest rate options, forward rate agreements, Interest rate and currency swaps, and precious metals
• The version of the The Model Code being updated was launched in February 2013; first part of covers 'timeless values' - areas such as morals and ethics, personal conduct, dealing practices and segregation of duties that do not change over time
• Why Ethics Matters in Trading: Honor, honesty and integrity must be the underlying principles of trading practices. Participants should implement and enforce both The revised PH Model Code (2020) for trading and the rules and procedures of one's own institution. The highest ethical standards should be maintained at all times.
• The Market: Decentralized (OTC) and unregulated. Market participants impose form of self-regulation by holding themselves bound to The revised PH Model Code (2020) which may form an integral part of a financial institution's policies and documented by the Risk Management Group
• Knowledge of the Law: Financial market professionals should comply with the regulatory requirements issued by the Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC) relevant to the banks' trading activities in the money and capital markets, foreign exchange, and their select derivatives.
• Knowledge of Trading Conventions: Management must ensure that only certified Treasury Professionals are allowed to trade. Market participants should be trained and knowledgeable on the standard trading conventions of the products they are trading, which they are expected to adhere to at all times.
• Treasury market participants must not engage in act involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity or competence. They must also ensure that their overall conduct and demeanor are appropriate with respect to the highest standard of professionalism as adhered to by their institution and the banking industry as a whole.
• Management should adopt policies and procedures to prevent general misconduct: Develop and/or adopt a code of ethics to which every employee must subscribe and make clear that any personal behavior that reflects poorly on the individual involves the institution as a whole or the industry, will not be tolerated. Disseminate to all employees a list of potential violations and associated disciplinary sanctions, up to and including dismissal from the institution. Check references of potential employees to ensure that they are of good character and not ineligible to the financial industry because of past infractions of the law.
• General Personal Conduct: Treasury market participants should be made aware of the consequences of their professional, ethical and social behavior. It is expected that they will comply with the highest code of conduct standards in all that they do for the organization, the market and in their personal lives. They may be held accountable for any actions or discussions which break fair market practices, and damage the reputation of their company and their profession. Management should ensure that policies are in place in order that business is conducted within the framework of applicable professional and ethical standards, laws, regulations and internal policies which, additionally, should have procedures to deal with individuals who have acted inappropriately.
• FXGC PRINCIPLE 1: Market participants should strive for the highest ethical standards.
• ILLUSTRATIVE EXAMPLE: An FX trader received his daily Foreign Currency Ledger report from the Financial Control Unit of the bank showing his consolidated FX position. That morning, the report showed a long position of USD 5MM when the trader was only expecting to be square for that day. He verifies with the Financial Control officer his position and the long position was caused by some unspotted trade transactions. The USD/PHP price was trading lower and he would therefore incur a loss given his position. Out of frustration, he shouts and curses at the Financial Control officer. The Treasurer, being a witness to the FX trader's unethical behavior, talks to the him and warns him that this behavior is not acceptable.
• FXGC PRINCIPLE 2: Market participants should strive for the highest professional standards.
• Drugs, Alcohol and Substance Abuse: Management should take all reasonable steps to educate themselves and their staff about possible signs and effects of the abuse of drugs, including alcohol and other substances. Policies should be developed and clearly announced, including penalties for individuals who are found to be substance abusers. Drugs and abused substances are not permitted inside dealing rooms and, as such, users are not allowed to enter the trading room under such influence.