RIP….Last-look? Depends who you ask

Back in 2015, just before the publication of the Fair and Effective Markets Review (FEMR) report, that led to the FX Global Code of Conduct, I wrote that it was time to Say goodbye to last look.

A few months later, the NY Department of Financial Services (NYDFS), handed Barclays an $150m penalty for abuse of last-look, with NYDFS stating:

Barclays Used “Last Look” System to Automatically Reject Client Orders that Would Be Unprofitable Because of Subsequent Price Swings during Milliseconds-long Latency (“Hold”) Periods.

Roll forward to May 2017, and the publication of the final FX Global Code of Conduct. 

Now, the Global Foreign Exchange Committee (GFXC) has published feedback from market participants on ‘last-look’ practices in the market, in particular views on the Global Code’s guide to ‘trading in the last look window’ (see end of post for the two questions asked).

The first question asked if they agreed or disagreed with the statement in Principal 17 that…

During the last look window, trading activity that utilises the information from the Client’s trade request, including any related hedging activity, is likely inconsistent with good market practice because it may signal to other Market Participants the Client’s trading intent, skewing market price against the Client, which (1) is not likely to benefit the Client…

Most responses agreed with the questions asked, with many calling for the removal of the bold word ‘likely’ in the above sentence, making it far stronger.

What was also interesting, was that of the responses:

All the banks were all in favour of some form of last-look, whilst the non-bank liquidity providers, the ECN and the exchange all supported firm liquidity with no last-look.

Worth having a read through the responses here and their views on the value or not of the last look window.

Question 1 The Code states that “During the last look window, trading activity that utilises the information from the Client’s trade request, including any related hedging activity, is likely inconsistent with good market practice because it may signal to other Market Participants the Client’s trading intent, skewing market price against the Client, which (1) is not likely to benefit the Client…” Do you agree or disagree? Are there specific situations where this trading activity benefits the Client? In those situations is such trading activity related to the validity or price checks that the Code states as the purpose for last look? Please provide reasons for each response.

Question 2 Based on your response to Question 1, do you consider that the language set
out in the Code on this activity should be modified (for example, should it be strengthened further or provide further detail as to what may or may not constitute good practice)? Please provide reasons.

About Paul Blank

A career working in financial markets. Early career as an FX Trader, before moving on to e-Trading platforms and Fin-Tech solution providers. This blog looks at how evolving regulatory landscape impacts market participants across the capital markets, e-trading platforms/venues.
This entry was posted in FX Survey, liquidity, regulation, Uncategorized and tagged . Bookmark the permalink.

1 Response to RIP….Last-look? Depends who you ask

  1. Pingback: GFXC to change Principal 17 (Trading in last-look window) after market feedback | eTrading-Insights

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