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LMAX Exchange responds to GFXC request for feedback on Last Look practices in the FX market

London, 21 September 2017 - Today LMAX Exchange submitted its feedback on Last Look practices to the GFXC Secretariat, as part of the formal consultation process on the wording of Principle 17 of the Global FX Code.

Response to Specific Consultation Questions

As the first market participant to commit to the FX Global Code, LMAX Exchange welcomes the opportunity to provide feedback on Last Look practices in the Foreign Exchange Market.

Though the FX Global Code is a positive starting point for restoring trust in the FX industry and creating globally consistent guidance, LMAX Exchange doesn’t believe that the Code goes far enough on restricting or banning the potential market abuse that can result from the use of ‘pre-hedging’ and ‘last look’, in its wording of Principle 17.

Questions: Principle 17 of the Code states that “During the last look window, trading activity that utilises the information from the Client’s trade request, including any related hedging activity, is likely inconsistent with good market practice because it may signal to other Market Participants the Client’s trading intent, skewing market prices against the Client, which (1) is not likely to benefit the Client, and (2) in the event that the Market Participant rejects the Client’s request to trade, constitutes use of Confidential Information in a manner not specified by the Client”.

LMAX Exchange agrees that any trading activity, utilising the Client’s order information, during the ‘Last Look’ window does not benefit the client and at the very least, constitutes use of confidential information in a manner not specified by the client. Furthermore, we are not aware of any situation or scenario where pre-hedging during the ‘Last Look’ window can be beneficial to the client or where clients benefit from skewed market prices against their orders, caused by information leakage during the ‘Last look’ window.

The current wording in Principle 17 effectively legitimises pre-hedging, which could stand accused as front-running during the ‘Last Look’ window. Legitimate working of a client order will be indistinguishable from unethical front-running for pure profit-making utilising privileged Client’s order information. Front-running is considered ‘unethical practice’ in capital markets, defined as ‘unethical practice whereby someone with advance knowledge of a specific market order in, say, shares, bonds or a currency from a client steps in ahead and buys for their own account. When the client’s usually much larger order is executed and drives up the price, the private purchase can be sold at a profit’. Thus, if front-running is acknowledged as ‘unethical’ across all asset classes, why isn’t there a stronger stance in the Global Code on pre-hedging activity during the ‘last look’ window?

Thus, as a direct response to the consultation questions, LMAX Exchange recommends removing ‘likely’ from ‘likely inconsistent with good market practice’ in the wording of Principle 17, referring to ‘any hedging activity during the last look window utilising the information from the Client’s trade request.

Longer-term, LMAX Exchange believes that the Code should ban ‘last look’ at least on anonymous multi-dealer trading venues; it can be argued that the practice may still have its place in the disclosed bi-lateral trading relationships (i.e., bank to specific client), if both counterparties prefer to trade with ‘last look’. Banning ‘last look’ will avoid any potential for market abuse, that has already been evidenced by recent scandals and legal investigations for the misuse of ‘last look’ by some of the most reputable, global financial institutions. LMAX Exchange believes that the need for ‘last look’ has become obsolete; the technological advancements and availability of real-time streaming market data, enabling instantaneous price checks, have entirely eliminated the need for ‘last look’ as a risk management tool. The practice of ‘last look’ that doesn’t exist in any other asset class, erodes trust in FX trading at the time when the industry needs to reinstate much-needed transparency and fairness in FX markets.


View full response -

Media Contacts

For further information please contact:

LMAX Exchange:
Barbara Pozdorovkina T: +44 20 3192 2524 E: press@lmax.com

About LMAX Exchange

Recognised as one of the UK’s fastest growing technology firms, LMAX Exchange is the leading MTF for FX, authorised and regulated by the FCA. Servicing funds, banks, brokerages and asset managers, LMAX Exchange delivers firm liquidity, anonymous exchange quality execution and a secure, transparent level playing field to all market participants, regardless of status, size or activity levels.

The LMAX Exchange open order book is driven by no ‘last look’ limit-order liquidity from top tier banks and non-bank financial institutions. Orders are executed in price/time priority with real time streaming continuous market and trade data published to all members. Offering a comprehensive range of instruments including spot FX, precious metals, commodities and equity indices, LMAX Exchange operates a global FX exchange infrastructure with matching engines in London, New York and Tokyo.

LMAX Exchange - a unique vision for global FX.

Financial technology awards:

2017 Best FX Trading Venue - (ECN/MTF) – Fund Technology and WSL Awards more

LMAX Exchange has been awarded The Fund Technology and WSL Awards “Best FX Trading Venue - ECN/MTF”. The award honours excellence among providers to the institutional trading industry. close

2016 Best Trading & Execution – HFM US Technology Awards more

The HFM US Technology awards recognise hedge fund technology providers that have demonstrated exceptional customer service and innovative product development in the past 12 months. close

2013 Best Overall Testing Project – The European Software Testing Awards more

The European Software Testing Awards (TESTA) recognise excellence and innovation in the software testing and quality assurance across a variety of industries. close

2011 Best Trading System – Financial Sector Technology Awards more

The FST Awards recognise excellence and innovation in the field of information technology within the UK and EMEA financial services sector. close

2011 Innovative Programming Framework – Oracle Duke's Choice Awards more

Oracle’s Duke's Choice Awards celebrate extreme innovation in the world of Java technology and are granted to the most innovative projects using the Java platform. close

FX industry awards:

2017, 2016, 2015, 2014, 2013 Best Margin Sector Platform – Profit & Loss Readers' Choice Awards more

LMAX Exchange has been awarded The Profit & Loss Readers’ Choice Awards “Best Margin Sector Platform” for five consecutive years. These awards are voted on by the readers and recognise excellence within the foreign exchange industry throughout the previous year. close

2016, 2015, 2014, 2013 Best FX Trading Venue - (ECN/MTF) – WSL Awards more

LMAX Exchange has been awarded The WSL Awards “Best FX Trading Venue - ECN/MTF” for four consecutive years. The awards honour excellence among providers to the institutional trading industry. close

2014 Best Infrastructure/Technology Initiative – WSL Institutional Trading Awards more

LMAX Exchange has been awarded The Wall Street Letter Institutional Trading Awards “Best Infrastructure/Technology Initiative” in 2014. WSL awards honour excellence among providers to the institutional trading industry. close

2013 Best Execution Venue – Forex Magnates Awards more

LMAX Exchange has been awarded the Forex Magnates Awards “Best Execution Venue”. The awards are granted to the top firms in their categories and announced at the annual London summit. close

Business growth awards:

2016, 2015 Winner – Deloitte UK Technology Fast 50 more

Deloitte UK Technology Fast 50 is a ranking of the 50 fastest-growing technology companies in the UK, based on percentage growth of fiscal year revenues over the last four years. close

2015, 2014, 2013 Fastest Growing Tech Company in the UK – The Sunday Times Tech Track 100 more

LMAX Exchange has been recognised amongst the UK’s fastest growing technology firms for three consecutive years. Tech Track 100, compiled by Fast Track annually and published by the Sunday Times each September, lists Britain’s 100 fastest-growing private tech companies based on sales growth over the last three years. close

2016, 2015 Winner – Deloitte EMEA Technology Fast 500 more

The Deloitte EMEA Technology Fast 500 pre-eminent technology awards program is a ranking of Europe, the Middle East, and Africa's fastest-growing technology companies based on percentage revenue growth over three years. close

2015 Recognised as a Tech City Future Fifty company – Tech City UK Future Fiftymore

LMAX Exchange is part of the Future Fifty programme, focused on accelerating the success of high-growth tech businesses. close

LMAX Limited operates a multilateral trading facility (MTF). Authorised and regulated by the Financial Conduct Authority, FCA Registered no. 509778.