Definition
Last look is a practice where a liquidity provider (LP) retains the right to hold an incoming order for a brief window -- typically between 1 and 200 milliseconds -- before deciding whether to accept or reject it. During this hold period, the LP can observe whether the market has moved against its quoted price. If the market moved unfavorably (from the LP's perspective), the LP may reject the order. If the market moved favorably or remained stable, the LP confirms the fill.
Last look originated as a latency protection mechanism for LPs dealing with high-frequency trading flow. It remains standard practice in OTC FX markets, though its transparency and fairness have been increasingly scrutinized by regulators, industry bodies (notably the FX Global Code), and the buy-side community.
What It Is / What It Is Not
What Last Look IS
- A hold window during which the LP can accept or reject an order
- Applied by the LP after receiving the order, before confirming the fill
- Designed originally as protection against latency arbitrage
- Standard practice in OTC FX; varies by LP and relationship
- The hold time and rejection criteria are LP-specific parameters
- Directly affects fill rates, slippage, and perceived execution quality
What Last Look IS NOT
- Not a broker-side practice -- it is applied by the LP at their end
- Not the same as requotes (requotes offer a new price; last look simply rejects)
- Not universally disclosed -- many LPs do not publish their hold times
- Not prohibited (the FX Global Code discourages asymmetric application)
- Not always unfair -- symmetric last look rejects both favorable and unfavorable moves
- Not the only factor in fill quality, but a significant one
How Last Look Works
The critical distinction is between symmetric and asymmetric last look. Symmetric last look rejects orders that moved significantly in either direction during the hold window (protecting both parties from stale pricing). Asymmetric last look only rejects orders that moved against the LP, while accepting those that moved in the LP's favor -- effectively creating a free option at the client's expense.
The Hold Time Spectrum
| Hold Time | Typical Context | Impact on Client |
|---|---|---|
| 0 ms (No last look) | Firm liquidity, ECN matching, some non-bank LPs | Highest fill certainty; slightly wider spreads |
| 1-5 ms | Minimal latency protection; fast electronic LPs | Negligible impact on most flow types |
| 5-50 ms | Standard bank LP practice for retail/institutional flow | Moderate rejection rates; noticeable during volatile periods |
| 50-200 ms | Aggressive last look; some bank desks for toxic flow | High rejection rates; significant execution quality impact |
| > 200 ms | Unusual; may indicate manual intervention or system issues | Severe impact; essentially a free option for the LP |
Benefits & Trade-offs
| Factor | Detail | |
|---|---|---|
| LP willingness to quote | Last look enables LPs to provide tighter spreads because they have rejection protection | |
| Market stability | Reduces the profitability of latency arbitrage, keeping LPs in the market | |
| Fill rate impact | Client orders may be rejected during volatile periods when fills matter most | |
| Asymmetric risk | If applied asymmetrically, the LP captures favorable moves while rejecting unfavorable ones | |
| Transparency | Hold times and rejection criteria are rarely published or standardized across LPs | |
| Effective spread | Quoted spreads may be tighter, but effective spreads widen when rejections and re-routing are factored in |
Common Marketing Claims vs Reality
| Claim | Reality |
|---|---|
| "No last look execution" | Verify carefully. The broker may not apply last look, but the underlying LPs still might. "No last look" should mean firm liquidity at the LP level. |
| "Firm liquidity" | True firm liquidity means the LP commits to filling at the quoted price. This is rare in bank LP channels and more common in ECN and non-bank LP streams. |
| "99.9% fill rate" | High fill rates during calm markets are easy. The real test is fill quality during volatile sessions, news events, and rollover periods. Ask for conditional fill rate data. |
What to look for in an Execution Policy
- Does the execution policy disclose whether LPs apply last look?
- Is the hold time window specified (even as a range)?
- Does the policy state whether last look is symmetric or asymmetric?
- Are LP rejection rates published or available upon request?
- Does the broker distinguish between firm and indicative liquidity sources?
- Is the FX Global Code's Principle 17 on last look referenced in the policy?
Educational content only. This is not financial advice. Always consult qualified professionals before making trading decisions.