BNY Mellon, NAB and RBC latest to ditch additional hold times

Banks join growing list of LPs to have scrapped the controversial practice

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BNY Mellon, National Australia Bank and RBC Capital Markets are the latest banks to remove the additional hold times they previously placed on electronic spot foreign exchange trades subject to last look checks – joining a growing list of liquidity providers to have ditched the controversial practice this year.

According to BNY Mellon’s electronic trading disclosure sheet published in July, the bank’s last look checks typically take up to 15 milliseconds following receipt of the client’s order and no additional hold time is placed on clients subject to the checks.

This marks a departure from BNY Mellon’s previous last look trading practices. In 2019 the bank told our sister publication Risk.net that hold times are disclosed to clients if requested, but declined to comment on how long the typical holding period is.

Similarly, NAB’s disclosure sheet states that price checks are performed immediately upon receipt of a trade request, with no delay applied. This also marks a change from the bank’s previous last look policy that delays of up to 100 milliseconds could be placed on clients subject to last look checks.

Commenting on the change, a spokesperson for NAB tells FX Markets: “NAB has updated its FX disclosure letter to advise clients that there is no hold time for electronic FX trade requests except for the time taken to manage its credit, operational and market risk checks.”

Meanwhile, RBC Capital Markets has removed the additional hold time it applied to clients subject to last look. The bank previously imposed a hold period of up to 100 milliseconds on clients, depending on their transaction history. Its new disclosure sheet explicitly states that it does not use an additional hold time when applying last look.

BNY Mellon and RBC Capital Markets did not respond to a request for comment on their updated trading practices.

Last look is broadly comprised of two elements: a price validity check and a credit check. However, many liquidity providers have historically placed an additional hold time of as much as 300 milliseconds on top of these checks to monitor client behaviour.

Following comments last September by Guy Debelle, then chair of the Global Foreign Exchange Committee (GFXC), and by the UK Financial Conduct Authority last November, hold times are increasingly regarded as running contrary to the FX Global Code.

The removal of additional hold times, either on disclosed or anonymous venues, or both, could affect the market in various ways. One consequence regarded as likely by some is a widening of bid/offer spreads to compensate for the loss of the hold times, which most LPs have used for years to increase profitability.

Yet many feel that scrapping them will help deliver the greater good of a more transparent market and deeper trust between counterparties. As a result, there are now 11 banks, such as Barclays,  that over the past nine months have removed the hold time they once applied to client trades.

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, among other trading behaviours. Yet there is typically a delay between a liquidity provider filling out a disclosure sheet and the sheet being available on the GFXC’s website.

However, not every bank that has recently published a GFXC disclosure sheet is as transparent about whether they impose an additional hold time during last look.

At the time of writing, neither Commonwealth Bank of Australia’s nor Scotiabank’s GFXC disclosure sheets make any mention of whether an additional hold time is imposed on clients subject to last look checks, nor do their separate last look policies available on their own websites. In 2019, both banks declined to comment when asked by Risk.net whether they imposed such a hold time on clients.

CBA and Scotiabank declined to comment when asked by FX Markets to confirm whether this has changed.

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