GFXC Frowns on Trading in the Last Look Window…with Exceptions

The Global Foreign Exchange Committee (GFXC) met this week to consider the results of its consultation over the wording in Principle 17 of the FX Global Code of Conduct, specifically relating to the use of last look, and says it has concluded that Principle 17 “should indicate that market participants should not undertake trading activity that utilises the information from the client’s trade request during the last look window”.

At the same time, however, the GFXC has recognised the concerns by some involved in the feedback process that such an action would negatively impact the quote and cover, or riskless principal model. As such, the committee says it has agreed that Principle 17 should clarify the conditions under which certain trading arrangements, often referred to as “cover and deal”, may be distinguished from the last look guidance.

In reaching this judgement, the GFXC says it balanced the feedback that highlighted the potential for trading activity in the last look window to benefit a client with other feedback that emphasised the risk that clients could be disadvantaged by such trading and that it could undermine the overall integrity of the FX market.

In line with the GFXC’s review process, finalised language will be shared with local FX committees before being published by the end of this year. Chris Salmon, chair of the GFXC, says, “The GFXC has made a number of decisions that will help to strengthen and embed the Code across the global market. I am grateful for the detailed feedback provided by market participants on last look in response to our Request for Feedback.”

The GFXC has also commissioned further work on two areas. These are “cover and deal” trading arrangements and disclosures regarding last look on anonymous e-trading platforms. “In both cases the objective is to determine whether the GFXC should enhance its guidance about good market practice, potentially through the development of additional illustrative examples for the Code,” it says in a statement.

Separately, the GFXC reaffirmed the importance of expanding the global reach of the Code and agreed a number of steps to secure this outcome.

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Colin Lambert

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