Actualidad Mexico

Code of conduct for the money and fixed income market

State Secretariat for Finance and Public Lending, Bank of Mexico, National Banking and Securities Commission

The Code of conduct for the money and fixed income market was published in Mexico in November, put together by the country’s financial institutions and authorities (State Secretariat for Finance & Public Lending, Bank of Mexico and the National Banking & Securities Commission) for transactions with government securities and those conducted in the money and fixed income market (the “Market”).

The Code, which is voluntary, is a set of guidelines aimed at making the market strong, equitable and transparent. It lays down a series of procedures and good practices to encourage the application of its six guiding principles:

Ethics. In order to achieve an ethical market, participants must abide by the principles of competence, integrity, honesty, responsibility and transparency. Thus, it recommends:

  • Adopting measures aimed at ensuring honest dealings with other participants, avoiding sharp practice
  • Behaving in an impartial and non-discriminatory way to clients
  • Behaving with integrity, respecting the standards in the Code
  • Setting policies for managing situations with the potential for conflicts of interest
  • Demanding that staff behave honestly and professionally
  • Striving to keep staff continually trained and up-skilled
  • Establishing limits in terms of receiving and requesting gifts or benefits

Corporate Governance. It recommends having a solid, effective governance framework so that market activities and their attendant liabilities can be supervised. To this end it advises:

  • Informing their governing bodies of the activity they are pursuing in the market and driving forward the creation of appropriate supervisory and control mechanisms
  • Establishing pay scales in line with international standards
  • Separating operating areas from areas involved in checking and settling transactions

Information exchange. Communication should be clear and precise, particularly in the case of confidential information. The following advice is given:

  • Use precise, objective language
  • Provide general information, with additional references
  • Keep a record of all communication
  • Avoid spreading confidential or private information

Executing transactions. In an effort to improve the market’s efficiency, stability and integrity at all times, the recommendations are:

  • To inform the client of the function being performed when executing orders and transactions, making sure that risk-related issues are explained
  • To function always in a professional, clear and transparent manner
  • To have procedures in place monitoring the proper functioning of those operating systems enabled by new technologies
  • To set prices and interest rates at comparable market rates
  • To put mechanisms in place to record transactions

Confirmation and settlement. The Code defines processes that are effective in mitigating the risk involved in confirming and settling market transactions. In order to make these post-deal processes transparent, participants must:

  •  Specify all the terms of the transaction when it is being agreed
  •  Inform clearly of the risk associated with the transaction
  •  Report any modification to or cancellation of the transaction
  •  Set up policies to ensure transactions are properly confirmed and subsequently reviewed by a department that is independent of operations.

Managing risk and regulatory compliance. Participants must foster an environment of monitoring and regulatory compliance in order to identify risks associated with their market participation, so the following suggestions are made:

  • Holding to a risk-identification strategy
  • Ensuring separation and independence between the operating divisions, on the one hand, and risk management and regulatory compliance on the other, and also from processing, accounting and settlement of transactions
  • Having contingency plans in place and a framework of regulatory compliance