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#1 26-12-2019 17:35:49

johnedward
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From: Paris - France
Registered: 21-12-2009
Posts: 3068
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ASIC report on institutional trading: last look rejection rate at 1.5%

ASIC report on institutional trading: "last look" rejection rate for Australian traders is approx. 1.5%


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Australia's Securities & Investments Commission (ASIC) has just published its report on local institutional trading practices.

The ASIC has identified several good - and worse - practices used by active market participants.

The regulator reviewed the disclosure and imputation of spreads to customers by 11 participants. It also examined the "last look" feature to better understand market practices, the frequency of transaction rejections and the awareness of traders of this practice.

The list of companies that the regulator examined is as follows:

Arrow ANZ Banking Group;
Arrow Citigroup;
Arrow Commonwealth Bank of Australia;
Arrow Deutsche Bank;
Arrow Goldman Sachs;
Arrow HSBC;
Arrow JP Morgan;
Arrow Macquarie;
Arrow National Australia Bank;
Arrow Royal Bank of Canada;
Arrow UBS;
Arrow Westpac Banking Corporation.

With regard to the "last look" feature, the regulator held over 29 meetings within the industry. In general, traders didn't fully understand the "last look" feature, as the practice was often seen as a "cost of doing business".

The regulator evaluated the disclosure materials provided to clients during the last review and analysed statistics on the rejection of transaction requests during the previous calendar year. The regulator found that the "last look" rate of rejection for Australian traders was around 1.5%, with high frequency traders receiving the highest number of transaction rejections.

The list of bad practices includes the disclosure of last-minute practices to clients that are difficult to access, complex and hard to understand. In addition, ASIC determined that transaction rejections were limited to circumstances that benefited the participant, not the trader. In addition, there were long hold periods before a client was informed of a transaction rejection.

ASIC also reviewed the mark-up practices of the 11 participants, including:

Arrow Disclosure of surcharges made to traders;
Arrow Internal mark-up procedures and practices;
Arrow The methods used and the measures taken to apply the increases;
Arrow Analysis of data on spot and forward exchange transactions for a sampling period in May and June 2018 in order to examine the reasonableness of the increases requested;
Arrow Calculations to identify markups on trades that appeared to be outliers.

A set of less effective practices has been identified, such as opaque and inconsistent mark-up practices applyied to traders, as well as ad hoc and manual monitoring of a sample of mark-ups.

As of April, the total volume of foreign exchange trading worldwide was approximately US $6.5 trillion per day for spot trading, forward contracts, swaps, options and undeliverable futures contracts. About 1.5% of the global volume of foreign exchange transactions takes place in Australia, the AUD being the fifth most traded currency in the world (about 6.7% of global volumes).

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