Currency Trading’s ‘Last Look’ Rules Are Changing, BOE Says

  • BOE previously said the practice was vulnerable to abuse
  • Barclays was fined for using last look to reject trades

A controversial practice in currency trading known as “last look” is beginning to change, according to the Bank of England, which is among the regulators to have scrutinized such market rules.

Some foreign-exchange platforms have changed their policies, giving priority to orders that are less susceptible to exploitation, the BOE said in a report on Thursday. It comes a year after Britain’s central bank said last look was vulnerable to abuse. London is the global center for currency trading, a $5.3 trillion market.

Last look gives a market maker, such as a dealer, time to back out of a trade. That means a bank or proprietary trading firm could unfairly learn a counterparty’s intentions without having to complete the trade. New York’s Department of Financial Services fined Barclays Plc last year, saying the bank used last look to back out of trades that would have resulted in it losing money.

“Some FX trading platforms have changed the matching rules on their platforms to prioritize executable orders over last-look liquidity,” the BOE said in its Fair and Effective Markets Review Implementation Report.

FastMatch Inc., run by former Credit Suisse Group AG director Dmitri Galinov, said late last year that it will more strictly monitor last look. Bats Global Markets Inc., which runs the trading platform Hotspot, last year cut the time market makers have available for last look.

The BOE is contributing to a code of conduct, which is being overseen by the Bank for International Settlements, that will include examples and guidelines for behavior. The code will be published in May 2017, and will also include guidance on market practices such as last look.

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