May 30, 2018 / 8:20 PM / in 3 months

Mexico central bank makes final call to sign new FX ethics code

MEXICO CITY, May 30 (Reuters) - Mexico’s central bank this week made a final push to convince local banks and brokers to sign on to a code of conduct for the foreign exchange market that aims to curb abusive practices like collusion.

Banks and brokers face a Thursday deadline to sign onto the code if they want to able to do business with the central bank, Governor Alejandro Diaz said in a presentation on Monday to banks and brokerages organized this week by Thomson Reuters and the central bank.

Companies that do not sign would be unable to carry out transactions such as dollar auctions with the central bank.

The code is a global effort that fell out of prosecutions against the world’s biggest banks for manipulating the Libor rate, and foreign exchange and commodities trading, he said.

In an interview with Reuters after his talk, Diaz de Leon declined to say how many companies had signed the code so far.

“We anticipate and hope that we have a very strong participation,” he told Reuters. “It involves work and effort for participants (but) it is a global trend from which we cannot separate ourselves.”

Late last year, banks operating as market makers in the bond market were pushed by the central bank and the finance ministry to sign a similar code in wake of an investigation of major global banks into collusion in the Mexican bond market by the country’s anti-trust agency.

The probe by the Federal Competition Commission (Cofece) reflects the Mexican government’s halting efforts to increase market oversight.

The same banks are being sued in the United States by a growing list of U.S. pension funds that allege they conspired to fix prices, making them overpay for Mexican peso bonds as a result of the banks’ pricing scheme.

Diaz de Leon declined to comment on those allegations or the Cofece probe, which is still ongoing, but noted that the central bank and the finance ministry had worked together on the code for market makers, which is obligatory to participate in central bank auctions.

“For us, it is very important is to reinforce the elements of market integrity that give confidence to both local and foreign investors,” he said.

“The code of conduct in the fixed income and money market precisely contributes in that direction to take a step toward certainty that it is a liquid market, that is deep and with sound practices.” (Reporting by Michael O’Boyle and Ana Isabel Martinez; Editing by Lisa Shumaker)

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