American Authorities Are Having a Look at Banks'”Last Look”
The U.S Justice Department and the Securities and Exchange Commission are investigating Barclays Plc over the procedure of last look
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.
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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.
“Last look” provision is a HIGHLY CRIMINAL “procedure”. It is not only highly questionable from a business point of view but especially from a moral point. Yeah, I used the word “moral” in connection with Barclays – which is a contradiction itself.
The results for the shareholders and for the “inner circle” at Tier justifies the means. Somehow, all these multi-million USD bonuses have to be “earned”.
That´s one major reason why you should move your Prime Brokerage business away from Tier1: the arrogance of these people is ruthless.
I won't judge on what's fair or not fair. In fx the only rules you play by are the ones in your customer agreement. if you don't like last look then find a new counterparty. If the big banks end up not being able to use last look you will see spreads significantly widen. Banks and market makers are not charity workers. they will find a way to get paid for their service. what do you prefer last look or tight spreads? Ultimately, you can have tight spreads and cut off your LP'S that don't behave. Pay the ones who… Read more »
I won't judge on what's fair or not fair. In fx the only rules you play by are the ones in your customer agreement. if you don't like last look then find a new counterparty. If the big banks end up not being able to use last look you will see spreads significantly widen. Banks and market makers are not charity workers. they will find a way to get paid for their service. what do you prefer last look or tight spreads? Ultimately, you can have tight spreads and cut off your LP'S that don't behave. Pay the ones who… Read more »
It’s not possible to pinpoint last look used by Barx and not point fingers at every last liquidity provider and trading venue out there. The whole industry is based around a last look component that is not going to go away until there are alternatives like LMAX. Even LMAX struggles with a good portion of challenging flow out there. So good luck getting rid of last look.
American regulatory influence on last look will do nothing but drive more business offshore and further harm the world of forex.
andrei: neither CME, EBS, Reuters nor lmax have last look. And spreads dont blow out there too. There is really no good reason anymore for this – it works in futures and equities, it would work in FX. Of course they will never give it up w/o regulatory intervention – its a license to print money.
can someone point me where can I see that the SEC is doing this? A pointer to the Justice Dpt and/or SEC is required.