EBS, the CME Group-owned provider of electronic trading platforms and technology services in foreign exchange markets, has said it will by default deny liquidity providers Liquidity Providers A liquidity provider (LP) constitutes an individual and/or an institution that functions as a market maker in a given asset class. Broadly speaking, liquidity providers will act as both the buyer and seller of a particular asset, thus making a market. In the equities space, many stock exchanges rely on liquidity providers who make the commitment to provide liquidity in a given equity. These liquidity providers commit to providing liquidity in the hopes that they will be able to make a profit on A liquidity provider (LP) constitutes an individual and/or an institution that functions as a market maker in a given asset class. Broadly speaking, liquidity providers will act as both the buyer and seller of a particular asset, thus making a market. In the equities space, many stock exchanges rely on liquidity providers who make the commitment to provide liquidity in a given equity. These liquidity providers commit to providing liquidity in the hopes that they will be able to make a profit on Read this Term not signed up to the FX Global Code access to its EBS Direct liquidity pools starting from April 1st. The step is part of the firm’s update to its liquidity provider eligibility criteria for EBS Direct.

EBS Direct is the company's relationship-based and quote-driven forex trading platform. However, the FX Global Code is a set of guidelines first published by the Bank of International Settlement’s Foreign Exchange Working Group in 2017 to promote the integrity and effective functioning of the wholesale FX market.

In a statement released on Monday, EBS Direct explained that the measure is targeted at accelerating the industry’s shift towards full compliance with the Code. However, the FX services provider noted that clients will still be able to maintain relationships with disabled liquidity providers if they choose to and after they “proactively opt to do so.”

EBS Makes Other Rulebook Changes

According to EBS, other changes to its rulebook will include reducing its ‘last look Last Look Last look is defined as the process where liquidity providers (LP) are rendered the chance to reject trades within a specific period. Generally, this practice by brokers is used to mitigate risk while rendering more favorable terms to the LP. This is due to significant risk that can arise from poorly concocted price quotes that can be used as an advantage by latency arbitragers. Not all last look settings are the same.Last look settings tend to vary by client, trading platform, a client’s connec Last look is defined as the process where liquidity providers (LP) are rendered the chance to reject trades within a specific period. Generally, this practice by brokers is used to mitigate risk while rendering more favorable terms to the LP. This is due to significant risk that can arise from poorly concocted price quotes that can be used as an advantage by latency arbitragers. Not all last look settings are the same.Last look settings tend to vary by client, trading platform, a client’s connec Read this Term' thresholds from 200 to 30 milliseconds as part of an update to its dealing policy. The Global Foreign Exchange Committee (GFXC) defines ‘last look’ as a practice used in electronic trading where a market participant has a final opportunity to accept or reject a trade request made on its quoted price. In 2021, GFXC published a new guidance paper on ‘last look,’ providing further clarity to market participants about the appropriate usage of 'last look'.

Giving further details on the policy changes, EBS explained that it decided on the update after its detailed review of trading on EBS Direct showed that the average ‘last look’ hold times in 2022 were just 12 milliseconds, and 96% of volumes were with liquidity providers that have stated their adherence to the FX Global Code.

In addition to the previously stated changes, the electronic trading platforms provider said that it was working towards enhancing its transaction cost analysis tools. These are reporting tools that track the quality of orders' transaction prices and compare them to market conditions. The prices are tracked either at the time the orders were submitted or after the trades have been executed.

"As a market-leading platform for FX spot and forward liquidity, the changes we're announcing today for EBS Direct will accelerate the industry shift towards FX Global Code compliance," noted Jeff Ward, the Global Head of EBS.

Furthermore, Ward explained that while the company’s new trading rules will create “minimum standards” for its market, the new transparency tools will help the ecosystem evolve.