Asset managers are looking to clamp down on the controversial ‘last look’ practice which allows banks and brokers to reject orders even after a price has been agreed.
The Investment Association which represents a number of the world’s largest asset managers said banks and brokers should be forced to explain their reasons if they do reject a trade, in a bid to “shine a light” on the practice.
The IA has also identified a number of instances in which ‘Last Look’ should no longer be considered acceptable due to the potential for misuse of information by the liquidity provider. This includes pre-hedging in during the ‘Last Look’ window, trading activity based on information derived from rejected trades and trading activity based on information from a request for quotation which is in progress or those that are not won.
IA director of investment and capital markets Galina Dimitrova said: “Investors have long been concerned about the lack of transparency around 'Last Look'. We want to ensure that the FX markets are fair and effective as this benefits investors by enabling asset managers to make efficient and productive investments on their behalf.
“Building on the best practice outlined by the FX Global Code of Conduct, our recommendations will provide asset managers with much-needed information on their trades so that they can fully understand the impact of 'Last Look' on their business.”
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