Currency Traders Shun Last Look in Suspicious Climate, LMAX Saysby
Exchange surveyed more than 1,100 market participants
Urges regulators to speed up efforts, bolster sanctions
Most currency traders in the $5.3 trillion-a-day market want to see the practice known as last look banned, according to LMAX Exchange.
Those are some conclusions drawn from a survey of more than 1,100 industry participants carried out by the London-based foreign-exchange-trading venue. LMAX found that 76 percent of respondents preferred to trade without last look, or the convention in which dealers can reject losing trades at the last minute, while 62 percent of those surveyed called it the most unacceptable market practice.
“It will die slowly,” said David Mercer, chief executive officer of LMAX Exchange, who’s campaigning for last look to be abolished. “The dice are loaded, and that’s not the way any other asset class trades.”
The foreign-exchange industry is still reeling from a price-rigging scandal that led to $10 billion in fines and penalties during the past two years and prompted dealers to suspend or fire staff in the wake of a transatlantic crackdown. Central bankers and industry leaders are looking to beef up standards by developing a code of conduct that lays out voluntary guidelines, which aren’t as rigid as regulations.
In the 34-page report, LMAX called on regulators to be more aggressive in creating and implementing standards for market fairness and transparency. The exchange, which was founded five years ago and has trading volume of about $10 billion a day, said regulators should include more diverse market participants in the formation of better guidelines.
While there are efforts underway to stamp out misconduct, market participants still mistrust each other, with 65 percent of respondents saying their interests weren’t sufficiently protected, LMAX said. Among the survey participants were banks, asset managers, brokers, hedge funds and proprietary traders.
“We lost a lot of trust, and we haven’t regained it,” Mercer said by phone from London.