The Bank of Ghana, BoG has issued some directives on how participants in the forex market must conduct their businesses to help stabilize the cedi.
The new directives that is being implemented today [25 February, 2019] are also targeted at improving information flow on how operators in the forex market will react and act on issues related to the cedi dollar relationship.
The directives were categorized under areas such as Ethics, fairness and Integrity; General dealings Principles and market conduct, as well as Risk management compliance among others.
Directives to enhance transparency
Under Ethics, fairness and Integrity all market participants are required to conduct their activities ethically, transparently and professionally to ensure fairness and integrity of the foreign exchange market.
In addition, Market participants are expected to act in an honest and fair manner when dealing with clients and other participants. Market players are also required to act with integrity in all their dealings or activities.
The directive also stressed that it is imperative that market participants have a high level of awareness and understanding of market practices. Management of Licensed Foreign Exchange Dealers are required to subject their staff to the highest test of knowledge and continuously provide avenues for knowledge updates.
On Licensed foreign exchange the directive states that all Licensed foreign exchange dealers are required to make market by showing a binding two-way quote for all currencies traded in the interbank market if requested by another Licensed foreign exchange dealer.
If the amount is not specified, the Licensed foreign exchange dealer shall use the minimum traded lot of 250,000 US dollars or as agreed from time to time by the industry in consultation with the Bank of Ghana. The Licensed foreign exchange dealer is obliged to trade for that amount at the specified quoted price. A Licensed foreign exchange dealer with a different amount in mind shall specify it, but need not state whether the intention is to buy or sell. A Licensed foreign exchange dealer is not obliged to present a quote for any other amount other than the minimum traded lots agreed by the industry.
In addition transactions in any currency other than the US dollar require the approval of both parties and a market-maker may refuse to make a quote for it even if requested.
Also the directives pointed out that the interbank foreign exchange market is open from 9:00 to 16:00 hours GMT on all business days. The Bank of Ghana is exempt from this clause and may trade with a LFXD outside the regular market hours stated here.
Furthermore Licensed foreign exchange dealer are required to update indicative quotes for buying and selling US dollars at regular intervals, on the Reuters and Bloomberg information systems. Indicative quotes shall be updated at intervals of no more than 30 minutes. This will show the price at which a market-maker is prepared to buy and sell at the minimum traded lots.
The directive also maintained that all interbank FX trades must be booked on the Reuters platform and appropriately confirmed within five (5) minutes after the trade is concluded. These trades must also be reported in the daily FX report submitted to the Bank of Ghana.
Participation in FX Auctions licensed foreign exchange dealers are prohibited from participating in any form of FX auction initiated by any exporter or foreign exchange earner in Ghana.
Penalties for Breach of Relevant Sections of this regulation
According to the directives, any action which contravenes any section of these rules shall attract one or more of the penalties such as issuance of warning letters to the dealing officer and their LFXDs or FX Broker.
Also penalties will include administrative Fines / Monetary Penalties, Suspension of Licensed foreign exchange dealers, dealing officer, FX Broker and the publication of same in the newspapers.
In addition, offenders will face Revocation of FX dealing license and the publication of same in the newspapers.
“Legal prosecution of fraudulent cases. Where appropriate, Bank of Ghana will refer fraudulent cases to the law enforcement agents and the Attorney General for prosecution vi. Exclusion from trading with the Bank of Ghana vii. Name and shame of recalcitrant market participants.”