The purpose of this notice is to clarify the nature of the foreign exchange (“FX”) relationship between you and each entity in the Macquarie Group’s Commodities and Global Markets business with which you may trade FX, providing transparency around how Macquarie prices, manages and executes a range of transactions.
Macquarie is dedicated to upholding a high level of integrity in our wholesale FX dealings with clients and other market participants (together, “Clients”). This includes following our What We Stand For principles (which can be found at www.macquarie.com/au/about/company/what-we-stand-for), and adhering to applicable rules, regulations and requirements published by regulatory bodies and relevant international groups, including the principles of the FX Global Code as issued by the Global Foreign Exchange Committee. In doing so, we want to ensure that there are no ambiguities or misunderstandings regarding our practices and our approach to dealing in FX products.
We ask that you read this notice because it sets forth our relevant business practices and approach to dealing, including how we will communicate and transact, with our Clients in principal-to-principal wholesale FX transactions (in addition to when you act as agent for another principal). This notice is not, however, intended to be an exhaustive statement of Macquarie’s pricing or order management practices or policies, nor does it supercede any agreements you have entered into with Macquarie applicable to FX activities or as required by applicable regulations.
This notice may be updated from time to time in order to address changing regulatory, industry and other circumstances or requirements, with the most updated notice always available at www.macquarie.com/au/about/disclosures/regulatory-disclosures. If you have questions after reading this notice, please contact your senior Macquarie representative.
To the extent that you continue to discuss and/or enter into FX transactions with Macquarie, and unless expressly agreed between Macquarie and yourself or as required by applicable regulation, it will be on the basis of the disclosures in the most recent version of this notice. For the avoidance of doubt, however, this notice is not intended to exclude any mandatory obligations that we are required to undertake under any applicable law or regulation.
Our policies and procedures
Macquarie has specific policies and procedures applicable to relevant staff relating to how we will communicate, manage orders and transact. There is regular and specific training on what is expected from our staff, active management oversight and monitoring of actual or potential conflicts of interest, as well as clear escalation and resolution channels should any issues be identified.
These policies and procedures have been implemented with the intention of identifying and addressing the conflicts of interest inherent in principal trading relationships, and managing our business towards an acceptable return. These policies broadly focus on the following:
- Conflicts of interest in order handling and specific guidelines for the management and execution of Client orders;
- Handling of orders and order fills in a fair, timely and complete manner;
- Appropriate communication and communication channels, including guidelines on electronic vendor-provided communication platforms; and
- Specific guidelines on appropriate content of market commentary internally and externally.
These policies and procedures are reinforced internally with regular specific training and review, and we are active in industry forums that are seeking to implement higher standards in the wholesale spot FX markets, and other markets.
Macquarie is a dealer, counterparty and market maker in the wholesale spot FX market. As such, Macquarie engages in price discovery, price quoting, order taking, transaction execution and other related activities.
Unless we otherwise expressly agree that an order is to be managed and executed on an agency basis, Macquarie engages in these activities as principal for the benefit of Macquarie and will enter into transactions with you on a principal basis as an arm’s-length party.
In that capacity, Macquarie does not act as agent, fiduciary, financial advisor or in any similar capacity on a Client’s behalf and therefore does not undertake any of the duties that a party acting in that capacity would ordinarily owe in those circumstances, nor do Macquarie’s sales and trading personnel serve as brokers or agents to a Client with whom we deal in a principal capacity.
Due to the nature of Macquarie’s role in its dealings with you, Macquarie may at times have divergent or competing interests from those of our Clients.
Macquarie does not advise you
Macquarie will be truthful in its statements about any facts discussed with you, but our statements should not be construed as advice regarding investment, tax, accounting, legal or other matters. You are expected to have evaluated the appropriateness of any transaction for you based on your own position and circumstances, including your own assessment of the risks and merits of that transaction.
Where Macquarie acts as principal, it does so for its own account and any indicative or firm price provided will be an “all-in” price unless otherwise specified. This means that the price may include a mark-up which will be fair and reasonable and will take into account, among other things, the currency, size of the order, and market conditions (such as liquidity and price volatility), as well as relevant business costs, such as credit costs, costs of capital, execution venue and settlement costs, which may differ between Clients. Macquarie may also require the price to take into account risk management requirements depending on the positioning of our trade portfolio.
Macquarie and a Client may also, from time to time, discuss prices in relation to a bid, offer or order that is constructed of the market price at the time of execution plus a set fee, which may be inclusive of the cost of credit, margin and costs related to the execution of the transaction (referred to here as “market price plus agreed margin”). Macquarie’s acceptance of and effort to fulfil such bids, offers or orders does not constitute an agreement that Macquarie is acting as the Client’s agent. Consequently Macquarie, as principal, may transact with another Client at a price different than the bid, offer or order and may also earn compensation (such as mark-up or an on-top amount from such other counterparty) in connection with fulfilling any such Client transaction or order in addition to any designated on-top amount and need not disclose that compensation to the Client.
In both the “all-in” and the “market price plus agreed margin” cases above, when Macquarie is willing to execute a transaction with a Client, the price at which Macquarie would do so may include a spread or mark-up over the price at which Macquarie transacted, or may have been able to transact, with other Clients. Macquarie has discretion to provide different prices or services to different Clients for the same or substantially similar transactions.
Macquarie’s sales and trading personnel are not obligated to disclose the amount of revenue Macquarie expects to earn from a transaction, nor are they required to disclose the components of Macquarie’s all-in price. While we do not have any duties to disclose to a Client any markup included in the transaction price, we will be truthful if we do make a disclosure about whether and how much markup is included in the price.
Order management and execution
When Macquarie agrees to accept an order from you at a particular price (such as a limit or stop loss order), Macquarie is indicating its willingness to act as a principal counterparty to you and will attempt to complete the trade at the price you have requested. In so doing, Macquarie accepts market risk on the transaction at the point at which it is executed.
Macquarie will handle the order fairly and with transparency, and unless otherwise specifically agreed, will exercise reasonable discretion in determining the execution of such orders.
In relation to orders that you place with Macquarie, including where you confer Macquarie with a degree of discretion in execution (including but not limited to limit orders, stop loss orders, ‘at best’ or ‘at worst’ orders, or orders worked over a period of time), you should be aware that:
(a) Order parameters: To effectively manage your orders, Macquarie requires you to inform Macquarie of the parameters of each order that you place with us, including but not limited to the price, order amount, time period and, for stop loss orders, the stop level.
(b) Pre-hedging: Macquarie may pre-hedge orders when acting in a principal capacity in order to effectively manage market risk. Macquarie will not pre-hedge your order when acting as agent on your behalf.
Pre-hedging involves Macquarie managing the risks associated with one or more client orders through the establishment of a risk position (“inventory”). The intention in pre-hedging is to facilitate order execution and reduce the potential market impact of filling your order. It is not intended to disadvantage Clients or disrupt the market, and we are committed to undertaking pre-hedging fairly and transparently. Prevailing market conditions, as well as the size and nature of any anticipated transactions, will be among the relevant considerations in the manner in which Macquarie conducts its pre-hedging.
In relation to stop loss orders that you have placed with us, Macquarie may execute transactions that are close to the stop level of any stop loss order that you have placed as part of our pre-hedging approach. These transactions may impact market prices which may result in the stop loss order being triggered, however Macquarie will not transact with the intention of triggering stop loss orders nor disrupting the market, and is committed to handling all orders fairly and in accordance with industry best practice standards.
Macquarie may continue to conduct on-going business, including risk management, market making and execution of other Client orders, while undertaking pre-hedging.
(c) Management of potentially-competing Client orders: Macquarie may accept orders from multiple Clients at similar price levels in the same or related currency pairs, the effect of which has the potential for an order from one Client to conflict or compete with the interests of another Client’s order. Macquarie is committed to handling all orders fairly and in accordance with industry best practice standards.
(d) Order fills: Macquarie will endeavour, but is not obliged, to take reasonable steps to keep you updated as to liquidity and market conditions at the beginning of and, as appropriate, throughout the execution of your order. Macquarie will endeavour to fully fill orders which Macquarie is capable of filling within the parameters of the order, subject to the prevailing market conditions and other relevant business considerations including, but not limited to, Client instructions, credit lines, costs of execution and the need to prioritise certain Client orders. When Macquarie makes a decision on whether and how to fill your order, including partial fills, Macquarie will endeavour to communicate that decision to you as soon as reasonably practicable.
If Macquarie is unable to execute an order in full, Macquarie will endeavour, but is under no obligation, to notify you as to the reasons why the order could not be completed in full. Partial fill volumes may also be pre-agreed between the Client and Macquarie in the ordinary course of business. If you chose to place an order, Macquarie may not be able to fill your order, in part or full, even where other transactions have been executed in the market at the price or better or if the market publishes a price at that level, due to various factors which may include insufficient liquidity at a given price point or the inclusion of the aforementioned mark-up.
When an order can be executed at the order price, it does not mean that Macquarie held, acquired, or would acquire inventory to complete the transaction at the order price level or that there exists a tradable market at that level. Macquarie reserves the right to execute a transaction with a Client using Macquarie’s inventory or through acquisition or other hedging activities without disclosing to the Client the source and Macquarie’s cost of the liquidity. As principal, Macquarie will generally attempt to execute an order to make an appropriate and reasonable return on the transaction if possible, taking into account Macquarie’s position, including its inventory strategy and overall risk management strategies, its costs, risks and other business factors and objectives, in Macquarie’s discretion.
When acting in a principal capacity as a market maker that manages a portfolio of orders for multiple Clients with potentially competing interests, including its own, Macquarie may trade prior to or alongside a Client’s transaction to execute transactions for Macquarie, to facilitate executions with other Clients, to manage risk, to source liquidity or for other reasons. These activities may have an impact on the prices we offer you on a transaction and the availability of liquidity at levels necessary to execute orders. There is also a risk that these transactions may trigger stop loss orders, barriers, knock-outs, knock-ins and similar conditions. In conducting these activities, Macquarie endeavours to employ reasonably designed means to avoid undue market impact, will act fairly and with transparency, and will not use information received from you to inappropriately derive a benefit for Macquarie. Macquarie has policies and procedures in place to address issues arising from these activities.
In addition, as a market maker, Macquarie may receive requests for quotations and multiple orders for the same or related currency pairs. Macquarie acts as principal and may seek to satisfy the requests of all of our Clients as well as managing our independent risk management objectives. We retain discretion with respect to how we deal with our Clients, including with respect to order execution, aggregation, priority and pricing.
Macquarie is unable to disclose at the time you wish to leave an order that Macquarie may be handling other Clients’ orders or Macquarie’s own FX risk management needs at the same time as, ahead of, or on an aggregated basis with, your order. Macquarie is under no obligation to disclose to a Client why Macquarie is unable to execute their order in whole or in part, provided that Macquarie will be truthful if we agree to disclose such information.
Macquarie’s sales, trading and other personnel will consult, including with respect to a Client’s interests, trading behavior and expectations, markup, spread, and any other relevant factors, on a need-to-know basis in order to handle Macquarie’s market-making positions, and for the benefit of Macquarie’s trading positions and the handling of Client transactions and orders.
Benchmark or Fixing Orders
A benchmark or fixing order is an order to buy or sell a specified amount of currency at the FX benchmark requested. Orders for transactions whose pricing is set by reference to certain FX benchmarks can create additional concerns for transaction execution and management of related risks. Reference is made to the Financial Stability Board’s Final Report on Foreign Exchange Benchmarks for a description of the relevant circumstances.
Macquarie has policies and procedures in place that seek to prevent, mitigate and manage conflicts of interest that may arise during the execution of FX benchmark orders. Macquarie executes benchmark orders according to the following principles:
(a) Information relating to benchmark orders will not be disclosed other than on a need-to-know basis to Macquarie staff or third parties; and
(b) Acceptance and execution of benchmark orders will be undertaken in a manner which is fair and transparent.
In the event that a benchmark that is intended to be used in relation to a Client order is not published on the required pricing date, then, subject to the terms of any agreement between the parties, Macquarie will work with the Client to determine an alternative pricing mechanism.
Where a transaction refers to a benchmark, such as CME Term SOFR, Macquarie may be using that benchmark under license from the benchmark administrator as a source of information for certain products. Where Macquarie is using a benchmark under license, the benchmark administrator has no other connection to the licensee or to the products or services for which the benchmark is being used and does not sponsor, endorse, recommend, or promote products or services offered by Macquarie. The relevant benchmark administrator has no obligation or liability in connection with Macquarie’s products or services, does not guarantee the accuracy and/or the completeness of any market data licensed to Macquarie and shall not have any liability for any errors, omissions, delays or interruptions to the benchmark or market data. Macquarie’s Client is not a third-party beneficiary of any agreements or arrangements between the relevant benchmark administrator and Macquarie. The market data provided by the relevant benchmark administrator is the property of that benchmark administrator or its licensors as applicable.
Binary and Barrier Options
Binary and Barrier options are a class of option that are either activated or cancelled when a predetermined level of a reference price is reached at a specified date or time (or during a specified date or time range).
Macquarie may execute transactions that are close to the predetermined level of any binary or barrier option order that you have placed in conducting on-going business, including risk management, market making and execution of other Client orders. These transactions may impact market prices which may result in the binary or barrier option order being triggered, however Macquarie will not transact with the intention of triggering any binary or barrier orders nor disrupting the market and is committed to handling all orders fairly and in accordance with industry best practice standards.
Protecting the confidentiality and security of your information is an important part of how we do business. Macquarie has policies, procedures and controls in place that are designed to protect your confidential information. If it is necessary to disclose your information internally or externally, including in order to execute transactions or manage risk, Macquarie will do so in accordance with these policies or procedures, which includes such disclosure being on a need to know basis.
Macquarie will protect confidential information through clear and accurate communications that support and promote a robust, fair, open, liquid and appropriately transparent market. This may include analysing, commenting on and disclosing information regarding executed transactions, as appropriate and on an anonymised basis (except where information regarding executed transactions has previously been publicly disclosed), together with other relevant market information, internally and to third parties, as market colour. With regard to executed transactions, Macquarie analyses this information internally on an individual and aggregate basis and may use the information for a variety of purposes, including business strategy, sales coverage, and counterparty risk and relationship management.
Macquarie is also subject to regulatory obligations, such as regulatory reporting obligations, that may require the disclosure of your information. Macquarie may also disclose your information, in accordance with applicable law, in the course of regulatory investigations or legal proceedings or as requested by any legislative, judicial or administrative body of competent jurisdiction.
In some instances, Macquarie may provide you with access to an electronic trading platform (including Aurora or other third-party platforms) that enables self-execution of, or the placement of orders in relation to, FX transactions, and which may include the use of algorithmic models.
Where this is the case, you should be aware that the prices displayed/quoted may (as per the relevant service agreement or market convention) consist of a core price combined with a mark-up that may take into account multiple factors, including execution costs, availability of credit, market liquidity and volatility. You should also be aware that typically the core price is an aggregated price from Macquarie and/or other external platforms, which aims to provide a consistently tight spread, allowing for the elimination of bad prints. If a price cannot be sourced by Macquarie, then no price will be shown to you within the platform.
Macquarie reserves the right to accept or reject submitted trade requests at its sole discretion based on risk management controls automatically applied by Macquarie. Pre-trade risk management controls can vary by client and execution method, and are applied for reasons such as credit availability, technology differences, connectivity and latency, or could also seek to protect Macquarie against certain trading behaviours. Controls that may be applied include:
- Credit checks: Pre-trade credit check will be performed to confirm there is sufficient available credit capacity for the legal entity requesting the trade to enter into the entire economic consideration contained in the trade request.
- Validity & Price checks: (commonly referred to as ‘Last Look’) Upon receiving a trade request Macquarie will confirm the transactional details are in the appropriate format and within defined risk limits and controls from an operational perspective. In addition, Macquarie will also perform an economic check to confirm that the trade price request is within the pre-defined tolerance threshold of the price at which Macquarie is willing to trade with the client. If the tolerance check deems the trade price request is outside the acceptable distance to the price at which Macquarie is willing to trade due to price movement, the trade request will be rejected.
Unless otherwise notified, Macquarie applies Last Look on a symmetrical basis which means that price requests which are outside of the tolerance thresholds in either direction will be rejected.
Macquarie cannot guarantee the functionality of Last Look logic implemented by third party vendors and questions related to those platforms should be directed to the platform vendor.
- Technology checks: The platforms and technology that Clients utilise can impact Macquarie’s ability to accept trade requests in an efficient manner. The duration of the time window through which Macquarie can accept a trade can vary based on several factors including the volume of trade requests, internal latency, and both internal and external throttling and technical disruptions.
Factors such as technical issues and sudden market moves may also cause trade requests to be rejected.
Information from submitted trade requests is not used for any purpose other than to accept or reject the request. While performing the above checks, Macquarie may undertake other trading activity, including activity resulting from other Clients and/or internal risk management requirements, however policies and procedures have been implemented to address such potential conflicts of interest. We attempt to accept or reject trade requests as fairly and efficiently as possible, and do not apply any additional hold times other than for the purpose of the controls described above.
In addition to this disclosure, Clients enabled on electronic platforms may also receive separate disclosures specific to the terms and conditions of each platform or enabled functionality. Clients may also request further information on the calculation of the price tolerance and fill ratios from their senior Macquarie representative.