When a request to trade against the quoted price is received, the LP may hold the request for some time, execute the trade (fill) at the price quoted, offer an alternative price (requote) or decline to trade (reject). Firm liquidity venues on the other hand operate an open central limit order book where trades are matched without optionality. Last look's quote-driven behaviour is commonly argued to be necessary to protect the liquidity providers in a fragmented and unregulated market place where there is no central exchange.
Regulationedit
The last look model has been the subject of several recent investigations and fines for misconduct over abuses of the practice and lack of transparency.[2]
Regulators are showing increased interest in the provision of last look liquidity in the FX market, with the Bank of England conducting a 'Fair and Effective Markets Review' (FEMR) which included recommendations for the FX industry. In response, the FX industry has moved towards adopting a global code of conduct.[3] However surveys indicate that many FX market participants do not believe that the situation has improved in the last two years.[4]
Cost analysisedit
Both industry comment[5][6] and the FEMR review final report[7] describe the use of transaction cost analysis (TCA) as a method by which buy side traders can assess quality of execution from all liquidity providers and determine if they are at a disadvantage from last look.
Referencesedit
^Cartea, Álvaro; Jaimungal, Sebastian; Walton, Jamie (1 November 2015). "Foreign Exchange Markets with Last Look". SSRN 2630662.
^"Barclays' FX fine: The death knell for last look?". Euromoney. 19 November 2015.
^"Foreign Exchange Working Group". www.bis.org. 22 July 2015.
^"The LMAX Exchange FX TCA and fair execution white paper". LMAX Exchange Group. Retrieved 2018-12-17.
^"A Hard Look at Last Look in Foreign Exchange". 17 February 2016.
^"Why Dealer-to-client FX platforms should provide TCA tools for buy-side clients". Finextra Research. 13 July 2015.
^(PDF). Archived from the original (PDF) on 2016-04-28. Retrieved 2017-08-17.{{cite web}}: CS1 maint: archived copy as title (link)
April 05, 2024
last, look, foreign, exchange, last, look, trading, practice, where, liquidity, provider, provides, quote, rather, than, firm, price, into, trading, system, execution, venue, last, look, venues, often, used, conduct, trading, foreign, exchange, markets, retail. Last look is a trading practice where the liquidity provider LP provides a quote rather than a firm price into the trading system or execution venue Last look venues are often used to conduct trading on foreign exchange markets FX for retail foreign exchange trading 1 Contents 1 Procedure 2 Regulation 3 Cost analysis 4 ReferencesProcedure editWhen a request to trade against the quoted price is received the LP may hold the request for some time execute the trade fill at the price quoted offer an alternative price requote or decline to trade reject Firm liquidity venues on the other hand operate an open central limit order book where trades are matched without optionality Last look s quote driven behaviour is commonly argued to be necessary to protect the liquidity providers in a fragmented and unregulated market place where there is no central exchange Regulation editThe last look model has been the subject of several recent investigations and fines for misconduct over abuses of the practice and lack of transparency 2 Regulators are showing increased interest in the provision of last look liquidity in the FX market with the Bank of England conducting a Fair and Effective Markets Review FEMR which included recommendations for the FX industry In response the FX industry has moved towards adopting a global code of conduct 3 However surveys indicate that many FX market participants do not believe that the situation has improved in the last two years 4 Cost analysis editBoth industry comment 5 6 and the FEMR review final report 7 describe the use of transaction cost analysis TCA as a method by which buy side traders can assess quality of execution from all liquidity providers and determine if they are at a disadvantage from last look References edit Cartea Alvaro Jaimungal Sebastian Walton Jamie 1 November 2015 Foreign Exchange Markets with Last Look SSRN 2630662 Barclays FX fine The death knell for last look Euromoney 19 November 2015 Foreign Exchange Working Group www bis org 22 July 2015 The LMAX Exchange FX TCA and fair execution white paper LMAX Exchange Group Retrieved 2018 12 17 A Hard Look at Last Look in Foreign Exchange 17 February 2016 Why Dealer to client FX platforms should provide TCA tools for buy side clients Finextra Research 13 July 2015 Archived copy PDF Archived from the original PDF on 2016 04 28 Retrieved 2017 08 17 a href Template Cite web html title Template Cite web cite web a CS1 maint archived copy as title link Retrieved from https en wikipedia org w index php title Last look foreign exchange amp oldid 1167013378, wikipedia, wiki, book, books, library,
