The Emerging Markets Traders Association, which represents Third World debt traders, has drafted a voluntary code of conduct designed to counter breaches of fair market practices.

The Federal Reserve Bank of New York has been looking into possible abuses in the $200 billion-a-year market for developing-country debt.

Among the regulator's major concerns; possible insider trading, inadequate bookkeeping and back-office practices, and insufficient controls on trading limits.

Fed Approval Not Needed

A Fed spokesman in New York declined to comment on the proposed code, which is being distributed to trading organizations for comment. The Fed official noted that the guidelines were drafted by an independent market group and do not require regulatory approval.

However, Tom Winslade, executive director of the trading association, said he hopes the principles and practices in the code "will be directly responsive to the Fed's concerns."

Rumors of Corruption

Mr. Winslade added that the code would underpin "an ongoing education in compliance" for association members.

Third World debt trading has mushroomed in recent years amid rising rumors of insider trading, market manipulation, and offshore tax evasion

Last December, E. Gerald Corrigan, president of the Federal Reserve Bank of New York, expressed concern about weak controls in that market.

The warning came after the Fed launched a series of targeted exams into trading practices in the third quarter of 1990 that have, since the beginning of this year, been followed up within regularly scheduled examinations.

The trader association is based in New York. Its members include major commercial banks, investment banks, and small brokers.

Standardizing Practices

In addition to stating fair market practices such as adequate disclosure, confidentiality, and a pledge not to use nonpublic information, the association's code also aims to standardize documentation and market practices for issuing firm quotes and terms.

Copies of the draft code have been sent to the Fed, the Office of the Comptroller of the Currency, Federal Deposit Insurance Corp., and New York State Banking Department.

A final draft of the code is expected to be ready by yearend.

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