Last Look vs No Last Look Execution

Many traders and brokers have been exposed to the terms “Last Look” and “No Last Look.”

Many traders and brokers have been exposed to the terms “Last Look” and “No Last Look.” It seems though not everyone fully understands the terms or what they mean to traders and brokers. The term last look simply means that a Liquidity Provider “LP” has the opportunity to reject a trade within a given time interval. No last look simply means once an LP gives a price quote it must accept the trade on it.

By getting last look the broker is able to often negotiate more favourable terms from its LPs. The reason for this is that the chances of an LP losing a significant amount on a given trade are drastically reduced by having Last Look functionality. With no last look an LP can lose hundreds of thousands of dollars giving a bad price quote which can then be taken advantage by latency arbitragers.

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Last look does not mean that the trader will get rejected or the clients experience is worsened. The reason for this is because the aggregation technology will allow the trade to be re-routed to the next best liquidity provider. Further, in a no last look environment brokers and traders will often get something called a “missed trade.” A missed trade means that the price the client tried to click on was taken by someone else. While it is technically not a reject, it is practically the exact same thing and will show up as a rejected trade in many aggregation systems.

In the end it seems that last look and no last look both have positives and negatives. A trader should be careful to avoid listening to any marketing hype related to these terms and these systems with a live trading account before making any judgement. The FX market is highly fragmented and there is a place for every type of execution and it is important to remember there is no perfect execution model.

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