TraderTools foreign exchange blog

Should last look have a last look?

By Yaacov Heidingsfeld, CEO
December 22 , 2015

Interesting conversation among technology vendors, market makers, and market oversight organizations about “last look”.   The FT in an article on December 17th 2015, is titled “Forex investors ready to bid farewell to ‘last look’ abuses” (http://bit.ly/1YvbNqQ) It’s not as simple as investors saying goodbye. Case in point, the Bank of England was unable to decide on whether it should remain an acceptable market practice (sic). In a recent FXWeek Europe panel I participated on, vendors and market participants were divided at the extremes and could not find middle ground, with one quoting a survey (conducted by that very same participant), saying that approximately 20% of institutional traders were not aware of last look. If in fact that is a representative number, shame on those traders. Last look has been around since the dawn of eFX. It was created to insure a level playing field, when latency was measured in seconds, not micros. FastMatch announced yesterday the implementation of “symmetrical last look” whereby liquidity providers would have to reject an equal number of execution requests, both in favor of and against the market maker, in an attempt to enforce “last look” as pure latency protection, in addition to supporting the traditional last look streams, giving a choice to customers. Liquidity makers claim (http://bit.ly/1myDUEt) they can offer more attractive spreads with last look, (not a surprise). I believe these are all solutions looking to fix the wrong problem. If there are participants abusing last look, we in the market should weed them out (http://bit.ly/1S9cqRT) Fine them. Bar them. If the issue is risk management on the part of liquidity providers, widen spreads, (http://bit.ly/1Ys8twH) and reduce the number of venues quoted on simultaneously, so as not to have too large an un-intended position, in too short a time. Given recent risk appetite for true market making activity, only a change in overall behavior, on both sides of the aisle, will lead to satisfaction by makers and takers alike.

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