UK's Investment Association Demands Transparency on 'Last Look' FX Trades
- Under current conditions, fund managers do not receive an explanation when trades are suddenly rejected.
The British Investment Association is calling on banks and brokers to provide greater transparency when they give reasons for pulling out of an FX trade at the last moment.
As it currently stands, fund managers are left to wonder what is causing some of the last-minute trade cancellations, as banks are not providing any information when such occurrences take place.
The new guidelines, published today, require banks and brokers to specify the reasons for cancelling a position at the last moment. They must adhere to the guidelines and provide a reason from a pre-set list of causes, including speed, price improvement, internal credit checks, and price tolerances.
The FX trading market in London averages a daily turnover of over $2 trillion. The sheer size of the market makes it critical that all activities are monitored to prevent misconduct by market participants.
‘Last Look Last Look Last look is defined as the process where liquidity providers (LP) are rendered the chance to reject trades within a specific period. Generally, this practice by brokers is used to mitigate risk while rendering more favorable terms to the LP. This is due to significant risk that can arise from poorly concocted price quotes that can be used as an advantage by latency arbitragers. Not all last look settings are the same.Last look settings tend to vary by client, trading platform, a client’s connec Last look is defined as the process where liquidity providers (LP) are rendered the chance to reject trades within a specific period. Generally, this practice by brokers is used to mitigate risk while rendering more favorable terms to the LP. This is due to significant risk that can arise from poorly concocted price quotes that can be used as an advantage by latency arbitragers. Not all last look settings are the same.Last look settings tend to vary by client, trading platform, a client’s connec Read this Term’ Causing Issues
There has been a plethora of instances over the past year in which the ‘last look’ practice has caused issues.
In July of last year, Alpari’s US subsidiary filed a lawsuit against 6 prime brokerages, over their use of the practice when dealing with Alpari.
In another case, Deutsche Bank was sued for delaying trades in order to get a last look window and use the information collected during this time to its own benefit. The bank later attempted to get the lawsuit withdrawn, but this attempt was rejected by a US judge.
GFXC Revised Global FX Code of Conduct
As a result of the aforementioned cases, the Global Foreign Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term Committee (GFXC) published an updated version of the Global FX Code of Conduct in December. The modifications pertained to Principle 17, which directly addresses the practice.
The GFXC issued a new guideline forbidding the use of information from a client’s trade request during what is considered to be a 'last minute' time frame.
The British Investment Association is calling on banks and brokers to provide greater transparency when they give reasons for pulling out of an FX trade at the last moment.
As it currently stands, fund managers are left to wonder what is causing some of the last-minute trade cancellations, as banks are not providing any information when such occurrences take place.
The new guidelines, published today, require banks and brokers to specify the reasons for cancelling a position at the last moment. They must adhere to the guidelines and provide a reason from a pre-set list of causes, including speed, price improvement, internal credit checks, and price tolerances.
The FX trading market in London averages a daily turnover of over $2 trillion. The sheer size of the market makes it critical that all activities are monitored to prevent misconduct by market participants.
‘Last Look Last Look Last look is defined as the process where liquidity providers (LP) are rendered the chance to reject trades within a specific period. Generally, this practice by brokers is used to mitigate risk while rendering more favorable terms to the LP. This is due to significant risk that can arise from poorly concocted price quotes that can be used as an advantage by latency arbitragers. Not all last look settings are the same.Last look settings tend to vary by client, trading platform, a client’s connec Last look is defined as the process where liquidity providers (LP) are rendered the chance to reject trades within a specific period. Generally, this practice by brokers is used to mitigate risk while rendering more favorable terms to the LP. This is due to significant risk that can arise from poorly concocted price quotes that can be used as an advantage by latency arbitragers. Not all last look settings are the same.Last look settings tend to vary by client, trading platform, a client’s connec Read this Term’ Causing Issues
There has been a plethora of instances over the past year in which the ‘last look’ practice has caused issues.
In July of last year, Alpari’s US subsidiary filed a lawsuit against 6 prime brokerages, over their use of the practice when dealing with Alpari.
In another case, Deutsche Bank was sued for delaying trades in order to get a last look window and use the information collected during this time to its own benefit. The bank later attempted to get the lawsuit withdrawn, but this attempt was rejected by a US judge.
GFXC Revised Global FX Code of Conduct
As a result of the aforementioned cases, the Global Foreign Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term Committee (GFXC) published an updated version of the Global FX Code of Conduct in December. The modifications pertained to Principle 17, which directly addresses the practice.
The GFXC issued a new guideline forbidding the use of information from a client’s trade request during what is considered to be a 'last minute' time frame.