JPMorgan Says Last Look Protects It From Currency Pricing Errors

  • Bank details its rationale behind trade acceptance in note
  • Vanguard, BlackRock, T. Rowe Price have expressed concern

JPMorgan Chase & Co. said the currency-trading convention known as “last look” protects it from latency and external pricing errors, in a report that outlines how it applies the controversial practice.

The world’s second-largest currency trader detailed its rationale for which foreign-exchange trades submitted by clients are accepted or rejected, in a Q&A note published on its website. Last look is under the scrutiny of a group of industry leaders tasked with rebuilding trust in the scandal-bruised industry.

Several currency trading venues have curbed last look in recent months, and Barclays Plc agreed to pay $150 million in November for misconduct relating to the practice. Vanguard Group Inc. said it’s prioritizing counterparties and venues that don’t offer the option to cancel transactions at the last minute. Other asset managers, including BlackRock Inc. and T. Rowe Price Group Inc., have expressed concern about the practice.

JPMorgan Chase said it uses a “price check,” or last look, to protect itself against delays in streaming electronic prices or “erroneous price formation” from external systems, according to the note from the No. 2 currency trader, according to Euromoney magazine. The bank said it rejects customer trade requests if prices move up or down beyond a pre-defined tolerance that’s set according to each client when the bank is acting as a market maker, on a principal basis, in the wholesale electronic spot foreign-exchange market.

While a client request is being considered, JPMorgan doesn’t hedge against that inquiry or impose delays to observe price movements when it’s deciding whether to match a trade, the bank said. If a request is turned down, the bank tries to give reasons to customers and can provide data on response times and rejection rates upon request, it said. 

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