These developments  7  4  Not only is liquidity both challenging to define and measure, but the impact of technological change on liquidity is difficult to isolate. On a number of dimensions, technological change appears to have improved both the efficiency of price formation and the ability to transact in size without significantly affecting market prices. But recent “flash” events in various markets – including rapid round-trips in prices on March 18, 2015, in the eurodollar currency pair and on October 15, 2014, in the U.S. Treasury cash and futures markets – have suggested the possibility that advancements in automated trading and changes in market structure may have improved liquidity in normal times but left markets prone to more frequent bouts of illiquidity during which price formation appears disconnected from fundamental information. Structural developments and the connection to liquidity and price discovery across markets warrant further study. See also recent comments by Lael Brainard, member of the Federal Reserve Board of Governors. Recent Changes in the Resilience of Market Liquidity. http://www.federalreserve.gov/newsevents/speech/brainard20150701a.htm. BIS central bankers’ speeches  have resulted in damage to the integrity of the global FX market – damage that will not easily be undone. The behaviors that triggered these criminal and regulatory actions illustrate that, for many, self-interest and the lure of near-term gains were put above the preservation of the market’s integrity and long-term sustainability.
Recent developments indicate that market participants have either not been aware of existing best practices guidance or have made the conscious decision to violate such guidance in the hopes of making a short-term gain. The cost of these short-term gains has come at all of our expense and we must all be engaged to ensure that this does not happen again. Moving toward more globally harmonized guidance – and consistent adherence to such guidance – is an important step forward in maintaining the integrity of the market. In recognition of the importance of this work, a new working group of the BIS Markets Committee has been formed to facilitate the establishment of a single global code of conduct and principles and to promote greater adherence to such guidance. 14 This newly formed  13  See http://www.ny.frb.org/fxc/2015/Global%20Preamble%20March30.pdf. 14  See: http://www.bis.org/press/p150511.htm. BIS central bankers’ speeches  7  structure will deepen and broaden the already initiated public-private partnership and will engage an even wider set of financial centers in order to effectively move this work on best practices forward. The work will occur on a global scale and will engage a wide variety of market infrastructures and participants, including both the buy side and sell side. It will likely draw upon a variety of efforts, including the important work done in the U.K. under the Fair and Effective Markets Review. The FXC will be actively engaged in this effort along with its counterparts abroad, at the direction of the BIS Markets Committee FX Working Group.