The US Justice Department, working in collaboration with the Securities and Exchange Commission (SEC), have started a probe into last look – a procedure used by the major global FX banks to renege on losing trades at the last moment. A broader ongoing investigation of the forex market apparently piqued their interest.
Regulators around the world, including the American ones, have already been investigating the practices of the banks in the FX market for quite a while. Until now, however, the investigations have only been known to focus on a conspiracy to manipulate FX rates by bank traders to the detriment of their clients.
In fact, just earlier on Tuesday, Barclays Plc (LSE: BARC) had announced in its earnings report it set aside another £750 million for settlement charges relating to foreign exchange-fixing-related settlement charges, bringing the provisions to a total of £1.25 billion.
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Barclays CEO Anthony Jenkins said about the manipulation allegations: “We remain focused on addressing outstanding conduct issues, including those relating to Foreign Exchange trading… resolving these issues is an important part of our plan for Barclays and, although it may be difficult, I expect that we will make significant progress in this area in 2015.” But now it seems he might have even more troubles to worry about in the FX field this year.
It has been revealed that Justice Department prosecutors and SEC officials have requested information from Barclays relating to its electronic-trading platform, specifically about the program that allows the bank’s traders to have a “last look” at an order before executing it, according to Bloomberg. The SEC reportedly is investigating whether the procedure violates American disclosure laws.
Earlier this month ACI, a non-profit association of markets professionals representing institutional bodies as exchanges, hedge funds and central banks, has also addressed the questionable procedure. “[Last look] should only be used in order to mitigate technological anomalies and latencies when showing firm prices to customers,” reads an updated Code of Conduct by the association.