This week we’ve seen a lot in the process about the global code of conduct and a lot of the issues that we raise within that. Guy Debelle, who is the chair of the FX working group charged with issuing the code of conduct, welcomed concerns to be raised from the market. I met Guy 14 months ago, and our concerns are the same, it appears the global code will allow last look, and it appears that pre-trade hedging, will be permissible, as long as they’re disclosed to the client. Put simply, it’s impossible for any client to understand all the disclosures, from all the different market participants around this opaque practice, it is impossible.
Today we’re going to talk about price improvements or positive slippage. We’re all very well aware of negative slippage, but too often as a client we’re not benefitting from price improvements. On LMAX Exchange, or indeed on any central limited order book, it’s natural if you fire in a market order, that occasionally you’re going to miss that price, and get negative slippage, and other cases you get positive slippage. On LMAX Exchange last year, about 93% of market orders were filled at the price the client aimed for, 4.5% suffered from negative slippage and 2.5% benefited from price improvement. That shows a natural market bias where, the trend is your friend and clients in the market are generally moving in one direction, so unfortunately, there is always a bias towards negative slippage.
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