THE MODEL CODE

In June, 2001, the Canadian Foreign Exchange Committee, the Canadian Committee for Professionalism, and the Financial Markets Association of Canada adopted The Model Code published by the international ACI – The Financial Markets Association. From time to time, the CCFP will make comments and qualifications pertaining to The Model Code and their applicability and practice in Canada. These will be posted below.

The full text of the adoption announcement is posted online.

Qualification to the ACI Model Code of Conduct

The Canadian Committee for Professionalism endorses the ACI Model Code of Conduct with the following qualification. In chapter 4, page 56, the Model Code states that “where a broker quotes a firm or unqualified price in a particular market or instrument for a specified or market amount and is subsequently unable to substantiate the quote when a deal is proposed, the bank proposing the trade is fully entitled to ‘hold’ or ‘stick’ the broker to the price quoted.”

We would emphasize the requirement that the price quoted be firm, and would further suggest that it is incumbent on a bank to qualify that the price is still good before dealing. In the event that the bank does go through the process of checking the price and it is confirmed as being good, if the broker is then unable to substantiate the proposed trade, the bank is entitled to hold the broker to the trade.

There are two other errors worth noting that will be corrected in the next reprint:

1. page 114, line 3 from the top;
   Print error – decimal point omitted, should read .95% instead of 95%
2. page 137, Interest rate Collar, line 5
   Should read “the buyer (of the collar) pays the seller....” As opposed to the “borrower pays the buyer.”

The ACI has provided the Model Code in downloadable formats and several languages on their Web site. Click here to go to the Model Code page and then click Market Practices (CFP).