View source for Finance:Last look (foreign exchange)

'''Last look''' is a trading practice where the [[Finance:Market maker|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 [[Finance:Foreign exchange market|foreign exchange market]]s (FX) for [[Finance:Retail foreign exchange trading|retail foreign exchange trading]].<ref>{{cite SSRN |title=Foreign Exchange Markets with Last Look |first1=Álvaro |last1=Cartea |first2=Sebastian |last2=Jaimungal |first3=Jamie |last3=Walton |date=1 November 2015 |ssrn=2630662}}</ref>
==Procedure==
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.

==Regulation==
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.<ref>{{cite web|url=http://www.euromoney.com/Article/3507759/Barclays-FX-fine-The-death-knell-for-last-look.html|title=Barclays' FX fine: The death knell for last look?|website=Euromoney|date=19 November 2015 }}</ref>

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.<ref>{{cite journal|url=http://www.bis.org/about/factmktc/fxwg.htm|title=Foreign Exchange Working Group|date=22 July 2015|website=www.bis.org}}</ref> However surveys indicate that many FX market participants do not believe that the situation has improved in the last two years.<ref>{{Cite web|url=https://www.lmax.com/fx-tca-transaction-cost-analysis|title=The LMAX Exchange FX TCA and fair execution white paper|website=LMAX Exchange Group|language=en-US|access-date=2018-12-17}}</ref>

==Cost analysis==
Both industry comment<ref>{{cite web|url=http://flextrade.com/a-hard-look-at-last-look-in-foreign-exchange/|title=A Hard Look at Last Look in Foreign Exchange|date=17 February 2016|publisher=}}</ref><ref>{{cite web|url=https://www.finextra.com/blogposting/11272/why-dealer-to-client-fx-platforms-should-provide-tca-tools-for-buy-side-clients|title=Why Dealer-to-client FX platforms should provide TCA tools for buy-side clients|date=13 July 2015|website=Finextra Research}}</ref> and the FEMR review final report<ref>{{Cite web |url=http://www.bankofengland.co.uk/markets/Documents/femrjun15.pdf |title=Archived copy |access-date=2017-08-17 |archive-date=2016-04-28 |archive-url=https://web.archive.org/web/20160428231937/http://www.bankofengland.co.uk/markets/Documents/femrjun15.pdf }}</ref> describe the use of [[Finance:Transaction cost analysis|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 ==
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[[Category:Foreign exchange market]]

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