Defunct Alpari Subsidiary in US Suing Six Prime Brokerages over ‘Last Look’

The lawsuit includes BNP Paribas, Citigroup, Credit Suisse, Goldman Sachs, Morgan Stanley and RBS.

Alpari US, the defunct US subsidiary of Alpari, has filed legal cases against several prime brokers which had been executing orders for the firm. Under New York law, the firm may still open legal cases against its former FX transaction counterparts regardless of its dissolution in 2015. The lawsuit includes BNP Paribas, Citigroup, Credit Suisse, Goldman Sachs, Morgan Stanley, RBS.

The legal action undertaken by Alpari US is supported by two legal cases, one of which is still ongoing. The case of Axiom vs. Barclays over the controversial last look practice used by Barclays via its BARX trading platform has become a magnet for companies looking for compensation for rejected orders.

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Barclays paid $50 million to settle the lawsuit. The second case is against Deutsche Bank and is in the middle of discovery at present after a motion for discovery was defeated by the legal representatives of Axiom.

According to the court, all persons who submitted a trade or trade instruction for an FX instrument to Barclays over BARX between June 1 2008 and April 21st 2016, the latter being the date of preliminary approval of the settlement, could be included in the settlement class.

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The cases are similar to two other cases with different outcomes. One legal proceeding was settled and the other one was not. The case filed by Alpari US does not include Barclays.

Last Look Controversy

The banks allegedly tuned their trading platforms to reject orders under certain circumstances. Once the matching engine matched up a trade on the electronic trading platform, a bank may have taken additional time to determine whether or not to execute the trade. In the meantime the matching engine matched them with Alpari and the prime brokers would use the additional information from the trade to trade to their advantage. Ultimately the claim asserts that the banks accepted only trades which would result in profit for the bank.

As a result the brokerage claims to have received unusually high rejection rates. Historically, banks argue that the software is in place to tackle latency issues. They need to make sure that they are not hit by counterparts that are trading in different time zones. The argument is that over the years, technology and collocation of servers has dramatically reduced the amount of travel time for orders and the last look practice used by the banks is indefensible.

In many instances when clients have asked about rejection rates, they were not told the truth. Since the cases were filed, several major banks have issued disclosures that are made to customers in their account agreements.

Developments pending in the case are to follow. There is yet to be a ruling by the court on a motion to dismiss the case in the next 6 to 9 months, a timeframe which is an average estimate.

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