Last Look

In exchange-traded markets, a resting quote is firm: hit it and the trade exists. Over-the-counter FX evolved differently. Quotes streamed to clients are, in many arrangements, indicative until the liquidity provider confirms — and last look is the confirmation step, a brief hold window in which the provider may accept the order, reject it, or in some configurations requote it.

The practice has a defensible origin. In a fragmented market where a provider streams prices to many venues simultaneously, a quote can be picked off after the market has moved — by latency arbitrageurs with a faster view of the same market — and last look functions as a risk control against being systematically run over on stale prices.

The controversy is that the hold window is an option, and options have value to the holder. A provider that checks the market’s drift during the window and rejects precisely those orders where the move went against it — while filling the ones where the move went in its favour — has converted a risk control into a systematic transfer from the client. The visible symptoms are asymmetric: rejection rates that correlate with market direction during the hold, and fill quality that is worse than the quoted price would imply. Principle 17 of the FX Global Code addresses the practice directly, calling for transparency about whether and how last look is applied and restricting use of the information in the client’s order during the window.

For traders, the operative fact is that last look behaviour is measurable from execution records: rejection rates conditioned on interim market drift, hold-time distributions, and requote frequency together characterise how a counterparty actually exercises its option. Last look is one of the mechanisms by which realised slippage detaches from displayed prices, and it belongs in any honest accounting of execution cost.