FastMatch to Require that Liquidity Providers Use Symmetrical Last Look

Institutional foreign exchange electronic communications network (ECN) FastMatch has officially informed its clients that it is changing its operating procedures. The company is aiming to introduce a new level of transparency to the market by requiring that all of its Liquidity providers use only symmetrical last look on the ECN.

Commenting to Finance Magnates, the CEO of FastMatch, Dmitri Galinov, explained: “As an industry, institutional FX needs to eliminate asymmetrical last look in order to provide fair markets to clients.”

“FastMatch will gain market share as a result of this change, because clients will be much more comfortable to trade on an ECN that protects its clients from Asymmetrical Last Look,” he said.

The company intends to enforce the practice by reviewing all liquidity providers that receive and reject more than 30 orders coming from FastMatch clients within a calendar month. The ECN will measure the P&L impact of every trade rejection and acceptance in U.S. dollar equivalent by using the mid price on FastMatch as a benchmark.

The changes are unprecedented in the industry and could allow FXCM Inc (NYSE:FXCM), which is currently holding a 35 per cent stake in FastMatch, to sell its interest in the company at a higher price as the ECN gains market share in the aftermath of the announcement.

Looking at the wider institutional FX industry, the move could inspire similar practices by other players.

Commenting on the matter, the CEO of Divisa Capital, Mushegh Tovmasyan, stated to Finance Magnates: “I think it's a matter of time until the industry moves in this direction and FastMatch is taking the bold step of being a first enforcer of a symmetrical last look practice. In the short term this may affect them from a liquidity providers standpoint, but ultimately it will prove to be the way forward.”

Indeed, with the enforcement in place, some liquidity providers (LPs) might choose to pull out their services from FastMatch. That said, with the clear client demand for symmetrical last look present, the feature could become a decisive for a number of market players.

Back in November, the New York Department of Financial Services imposed a $150 million fine on Barclays over the last look functionality of its electronic foreign-exchange Trading Platform BARX.

“FastMatch will gain market share as a result of this change, because clients will be much more comfortable to trade on an ECN that protects its clients from Asymmetrical Last Look,” he said.

Looking at the wider institutional FX industry, the move could inspire similar practices by other players.

Back in November, the New York Department of Financial Services imposed a $150 million fine on Barclays over the last look functionality of its electronic foreign-exchange Trading Platform BARX.