BNPP, BofA and Nomura ditch last look add-on

Bank of America, BNP Paribas and Nomura are the latest liquidity providers to remove an additional hold time for electronic spot foreign exchange trades subject to last look.

In BNP Paribas’s updated disclosure sheet, published on EBS’s FX Global Code registry in March, the bank states that no additional hold times are applied to electronic spot FX trades. Its last look window “typically” lasts up to 25 milliseconds, it adds.

The French dealer previously applied a 150-millisecond delay on whether to accept a trade request, according to its 2019 FX liquidity provider disclosure sheet.

Similarly, Bank of America’s FX disclosure sheet – published in February – reveals the US dealer has also removed additional hold times.

“Although this [last look] process does not include any added hold time, customer offer message validation, pre-trade credit checking and system latencies may delay customer offer response times. Customer offer response times are generally within 10 milliseconds,” the disclosure sheet states.

A 2021 analysis by FX Markets shows Bank of America previously applied a hold time of up to 50 milliseconds on trades subject to last look.

Nomura has also updated its electronic spot FX practices by removing additional hold times. “Nomura does not apply any additional delays or hold times beyond the time taken to perform the validity and price checks,” it states in its updated FX disclosure sheet.

While Nomura does not disclose the length of its last look window in its cover sheet, it says: “The time for Nomura to complete the checks will vary between individual requests and may be affected by factors such as technological latencies, connectivity issues, internal risk systems, product type and currencies.”

Nomura stated in 2019 that a maximum time delay of 50 milliseconds was applied to electronic spot FX trades.

A spokesperson for BNP Paribas did not comment at the time of publication. Spokespeople for Bank of America and Nomura declined to comment.

Last look broadly comprises two elements: a price validity check and a credit check. However, many LPs have historically placed an additional hold time on top of these checks to monitor client behaviour before committing to a trade.

The Global Foreign Exchange Committee (GFXC) has stressed that such behaviour goes against the spirit of the FX Global Code, which aims to encourage transparent markets. The UK’s Financial Conduct Authority has said any LP that continues to implement additional hold times could face regulatory investigation.

Over the course of the past year, most of the top 25 LPs removed these hold times on trades subject to last look, including Barclays, Citi, Deutsche Bank, Goldman Sachs, JP Morgan, NatWest Markets and UBS.

The controversial trading practice had been used by banks to increase profitability. Some participants have warned that an industry-wide ditching of this behaviour could cause bid/offer spreads to widen as LPs seek to plug the profitability gap.

Updated last look trading policies have primarily been communicated to the market in standardised disclosure sheets on the GFXC’s website, which require market-makers to outline their approach to last look, as well as other trading behaviours. There is typically a delay between an LP filling out a disclosure sheet and it being available on the website.