NEX Markets has released a new report, which it says demonstrates greater transparency and improved behaviour in the FX market since the FX Global Code came into effect in May 2017.
The report, entitled The FX Global Code: Changing Transparency and Behaviour, uses data from NEX Quant Analytics and highlights how the firm has witnessed a significant reduction in hold times, reject rates and a tightening of spreads on the bilateral EBS Direct platform. “This suggests an industry-wide move for greater transparency and improved market behaviour,” the firm says.
A New York judge has thrown out a class action lawsuit led by Axiom Investment Advisors against Deutsche Bank, which claimed the bank abused the practice of last look in its foreign exchange trading.
Judge Lorna Schofield threw out two class actions, arguing that neither satisfied the requirements for a successful class action in that different clients had different experiences and there was no common theme of “unjust enrichment”. She also leans repeatedly on the New York Department of Financial Services report into Deutsche, which at one point notes that the bank “as a general matter” appropriately calibrated its last look settings.
The unsuccessful end of the Axiom Investment Advisors’ class action against Deutsche Bank over last look is an opportunity to look at one or two issues – specifically around the raft of legal actions taking place, a workstream of the Global FX Committee, and disclosures.
My first thought on reading through the judge’s Decision was “I wonder what those banks that settled are thinking now?” My second was the observation that the judge used the word "ambiguous" a heck of a lot.
This is a very special In the FICC of it podcast as Colin Lambert and Galen Stops bring in some guest commentators at the Forex Network Chicago conference: they're joined by Jim Cochrane, head of North America sales at BestX, Peter-john Byrnes, vice president, Networks and Infrastructure at Elysium Technology Group and Al Crane, director of sales at MarketFactory. The subjects of data, connectivity, liquidity are covered and one of the guest commentators makes a serious error of judgement by asking Lambert for his thoughts on last look!
The Australian Securities and Investments Commission (ASIC) is to further investigate the use of last look in foreign exchange markets.
ASIC commissioner Cathy Armour told a conference this week that while the regulator accepts that last look may help facilitate a liquidity provider’s legitimate risk management, it also introduces the potential to exploit confidential client trading intentions and to otherwise treat clients unfairly.
The regulator says it will also conduct more sets of on site reviews of local banks' foreign exchange businesses.
In this week’s podcast, Galen Stops lights the blue touchpaper and steps back to watch the fireworks by asking Colin Lambert about not only the Benchmark Fix, more specifically the research paper published this week, but last look as well following the news that a regional regulator is investigating the practice. Just to add to the mix, he also gets him going on another Lambert favourite, tracking error.
They also discuss the FX Global Code and fintechs and ask, ‘should they be adhering and signing up to the Code?’ and Lambert shares some reader feedback on this week’s opinion piece on FX options brokerage.
We all know the traditional description of spoofing – placing bids and offers down the stack, with no actual interest in trading. But what about an FX trader using last look? Spoofing is about intention to deal, but does someone deliberately using last look in the wrong fashion have that intention? I would suggest they do not and the Foreign exchange industry might want to look at how it monitors last look if it is not to attract the unwanted attention of the authorities.
The FX industry is advancing how it deals with certain issues, but the pipeline of areas in need of clarification and further debate shows little sign of slowing down. Two areas that concern me at the moment are exactly how platform operators are enforcing their rulebooks - are they being fair and balanced to both LPs and LCs? - and exactly what constitutes "full amount" trading? An open and data-backed discussion will solve the latter, but I wonder if we need an industry ombudsman for the former?
A second working group set up by the Global Foreign Exchange Committee (GFXC) in 2018 to look at how market participants operating the “cover and deal” model utilise last look has published a paper highlighting areas in which it believes practice can be improved. Primarily, the report stresses the importance of those operating cover and deal models ensuring that there is adequate disclosure of the practice, the way in which it is being used, and the clarification of the role and capacity in which the participant acts.