It was generally agreed that any new forum for discussing matters of mutual concern in the foreign exchange market (and where appropriate off-shore deposit markets) should be organized as an independent body under the sponsorship of the Federal Reserve Bank of New York. Such a Committee should:
- be representative of institutions participating in the market rather than individuals;
- be composed of individuals with a broad knowledge of the foreign exchange markets and in a position to speak for their respective institutions;
- have sufficient stature in the market to engender respect for its views, even though the Committee would have no enforcement authority;
- be constituted in such a manner as to insure at all times fair presentation and consideration of all points of view and interests in the market, and
- notwithstanding the need for representation of all interests, be small enough to deal effectively with issues that come before this group.
The objectives of the Committee are:
- To provide a forum for discussing technical issues in the foreign exchange and related international financial markets.
- To serve as a channel of communication between these markets and the Federal Reserve and, where appropriate, to other official institutions within the United States and abroad.
- To enhance knowledge and understanding of the foreign exchange and related international financial markets, in practice and theory.
- To foster improvements in the quality of risk management in these markets.
- To develop recommendations and prepare issue papers on specific market-related topics for circulation to market participants and their management.
It is understood that the Committee would seek to work closely with the FOREX and other formally established organizations representing other relevant financial markets.
In response to the results of the study, the Federal Reserve Bank of New York agreed to sponsor the establishment of a Foreign Exchange Committee. It was agreed that:
- The Committee should consist of no more than 30 members. In addition, the president of FOREX is invited to participate.
- Institutions participating in the Committee should be chosen in consideration of their participation in the exchange market here as well as of the size and general importance of the institution. Selection of participants should remain flexible to reflect changes as they occur in the foreign exchange market.
- Responsibility for choosing member institutions rests with the Federal Reserve Bank of New York. The Membership Subcommittee, chaired by a Federal Reserve Bank official, advises the Federal Reserve on membership issues.
- The membership term is four calendar years. A member may be renominated for additional terms; however, an effort will be made to maximize participation in the Committee by institutions eligible for membership.
The composition of the Committee should include: New York Banks; Other U.S. Banks; Foreign Banks; Investment Banks and other Dealers; Foreign Exchange Brokerage Firms (preferably to represent both foreign exchange and Euro-deposit markets); the president of FOREX USA, Inc. (ex officio); and the Federal Reserve Bank of New York (ex officio).
The Committee will meet with a specified agenda of items at least eleven time per year (monthly with the exception of August). The format of the discussion, however, will be informal.
Members are expected to attend all meetings.
Any recommendation the Committee wishes to make on market related topics will be discussed and decided upon only at its meetings. Any recommendation or issue paper agreed to by the Committee will be distributed not only to member institutions, but also more widely, to institutions that participate in the foreign exchange market.
The Committee will have four standing Subcommittees: Membership, Trading Practices, Market Structure, and Risk Management. A representative of the Federal Reserve Bank of New York will serve as Chairman of the Membership Subcommittee. The Membership Subcommittee will aid in the selection and orientation of new members and assign members to the other standing Subcommittees. Each Subcommittee other than the Membership Subcommittee will meet at least quarterly and report periodically to the full Committee.
The Committee or any of its standing Subcommittees may designate ad hoc working groups to focus on specific issues.
Depending on the agenda of items to be discussed, the Committee or its standing Subcommittees may choose to invite other institutions to participate in discussions and deliberations. Summaries of discussions of topics on the formal agenda of Committee meetings will be made available to market participants by the Federal Reserve Bank of New York on behalf of the Committee. The Committee will also publish an annual report which will be distributed widely to institutions that participate in the foreign exchange market.
Meetings of the Committee will be held either at the Federal Reserve Bank of New York or at other member institutions.
In addition to the meetings provided for above, a meeting of the Committee may be requested at any time by two or more members.
RESPONSIBILITIES OF COMMITTEE MEMBERS
The Foreign Exchange Committee is composed of institutions who participate actively in the foreign exchange markets as well as other financial markets world-wide. As a senior officer of such an institution, the Committee member has acquired expertise that is invaluable to attaining the Committee's objectives. The member's continuous communication with the markets worldwide generates knowledge which is necessary to the Committee's deliberations of market issues or problems. Effective individual participation is critical if the collective effort is to be successful.
The responsibilities of membership apply equally to all associated with the Committee, whether they are serving currently as a formal member or an alternate member.
The specific responsibilities of each member are:
- To function as a communicator to the Committee and to the marketplace on matters of mutual interest, bringing issues and information to the Committee, contributing to discussion and research, and sounding out colleagues on issues of concern to the Committee.
- To represent to the Committee the concerns of his/her own institution. In addition, to reflect the concerns of a market professional as well as the constituency from which his/her institution is drawn or the professional organization on which he/she serves.
- To participate in Committee work and to volunteer the resources of his/her institution to support the Committee's projects and general needs.
1. A feasability study recommending the creation of the Foreign Exchange Committee was first conducted in June 1978. The resulting Document of Organization represents the study's conclusions and has been periodically updated to reflect the Committee's evolution (most recently in January 1996).