JP Morgan Publishes FX Last Look Practices

JP Morgan has published a document on its website explaining its trade matching and last look practices in its principal FX business. In it, while JP Morgan stresses it applies last look symmetrically and does not use latency buffers, Profit & Loss understands the document merely explains existing practices at the bank that are not new.

Upon receipt of a trade request, the bank says it undertakes a two-step process in order to determine whether to accept or reject the request. First, it assesses the validity of the request from operational and credit risk management perspectives (a validity check) and, second, it determines whether the trade may be executed at the requested price (the price check, or last look).

For the validity check, JP Morgan says when a trade request is received, it confirms that the transactional details are appropriate from an operational perspective; and that the legal entity submitting the request has sufficient available credit with JP Morgan to enter into the transaction.

Following a successful validity check, the bank says it compares the requested trade price against the then-current JP Morgan client-specific price at which the bank is willing to trade, to determine the extent of difference between the two. “JP Morgan will reject the trade request if any such difference exceeds a client-specific, pre-defined tolerance level set by JP Morgan (any such client-specific tolerance level, (the price movement threshold”) and will accept the trade request if any such difference is within the price movement threshold,” it states.

The bank says that following the trade matching process, it “will endeavour to notify the client, to the extent technologically feasible, as to whether the trade request has been accepted or rejected”.

JP Morgan’s move is the latest by the banking industry to raise transparency levels among its collective client base through the publishing of documents explaining its operating procedures. While they do open a window in the practices of the banks in FX, some observers see the rash of disclosures as being driven by a desire to establish a legal framework to protect the banks. The global Code of Conduct, released last week in New York by the FX Working Group does not, in its initial iteration, cover last look or trade matching – these areas, and others, are to be covered in stage two, work on which begins in the coming weeks.

The increased focus on transparency of actions around last look means the industry has to deal with what many believe is the bundling of multiple themes – trade arbitration, latency buffering and trade validation – which blur the issue. JP Morgan in its document says it uses last look, or “price check” as the bank terms it, to protect itself “against latency inherent in electronic communications or erroneous price formation generated by external systems.”

Last look is seen as vital by market makers in helping them provide control – especially in fast moving markets, however increased clarity around the use of latency buffering is to be welcomed. Latency buffering is where a market maker deliberately introduces a degree of latency to protect itself from faster traders or, more worryingly, to observe the client behaviour in the context of the market move and “pre-hedge” anticipated flow.

JP Morgan says in the document that while certain latencies and delays are “inherent” in processing trade requests, the bank does not impose latency buffers or other delays during matching in order to observe future price movements as part of the last look process. The bank also stresses that it does not pre-hedge trades whilst the matching process is being undertaken.

Just as asymmetric slippage is considered poor practice in retail FX broking circles, so too is asymmetric last look, when a market maker rejects trades that go against them but fulfil trades that go in their favour. Whilst market sources tell Profit & Loss that the practice is not believed to be widespread, there are inevitably whispered accusations suggesting some market makers employ the practice.

JP Morgan states in the document that price movement thresholds may be variable by client and are subject to change at any time. While the bank says it applies last look symmetrically, wherein trade requests are rejected no matter what direction the market has moved, it does add that it may allow price improvements beyond the threshold for “certain of our clients”. 

SFOsignals Site is Live!

We’ve been quiet for a couple of months but we were not idle. The SFOscanner site has been running as expected, gaining traction and gathering customers, but as part of the SFO overall suite of services we wanted to add market signals sharing capabilities. Investing has always had a social component, market is nothing if not a consensus building exercise. Sharing opinions and information has always been on our radar, and now SFOsignals.com is live and will give investors and traders capabilities of sharing investment ideas as signals.

Our site will bring together signal publishers and signals subscribers. Anybody who has trading ideas could come to SFOsignals.com and publish these ideas. Our site would record these signals and track their performance using independent market data, thus one of the important distinction between our site and other market signal publishers is objective historical performance. Our site would accumulate all published signals information showing true historical performance, including our proprietary SFO Rating of all published strategies. SFO Rating is a cool new way to value performance of different market participants. This one number is calculated taking into account many aspects of signal’s performance.

People that are interested in market signals can use our web site to look for trading and investing ideas. Our customers can be confident that information about different signals and strategies on SFOsignals.com is unbiased and truthful. They can subscribe to the strategies they like and when a new signal is published for that strategy they will receive this signal via e-mail right away.

We encourage anybody with interest in financial markets to give SFOsignals a try. Many Strategies available on our site offer free subscription. Come, try it and let us know what you think.

And as always do your homework, exercise common sense, seek professional help before investing and use good risk and money management techniques.

 

Happy trading everyone!!!

Happy New Year!!!

I started 2014 with an idea for a site, site where I can enter very specific criteria to search for stocks and options. Looking back on the last twelve months, it hasn’t been an easy road, with false starts and dead ends, changes in the strategy and development team, it hasn’t been easy, but in September our site, sfoscanner.com finally went live with basic stock scanning functionality. Over the next four months, we’ve added new data sources, options scanning and Autorun functionality, social media integration, etc. Today the site if functioning, we are collecting both stocks and options data every day, our database growing, new scanning options and new functionality added almost every day. I am excited to see how our website is shaping up. We are beginning to build our customer base and I am hoping our customers will be active, active in logging in and using the site as well as active in communicating with us, giving us their comments and feedback.

I believe 2015 will be a very exciting year for SFOscanner. We have a lot of ideas on how to make our site better and more useful to investing and trading community. 2015 will be the year when we will start marketing our site, the year when our customer base will grow and become more active. 2015 will be a SFOscanner year!!!

Happy New Year and happy investing everyone!!!

I am looking forward to building the SFOscanner.com to be a valuable resource for all traders and investors.

D.R.

 

Site Update – November 28th, 2014

First of all, happy Thanksgiving everyone!!! This is a great holiday, we all have a lot to be thankful for, so thank you, thank you, thank you.

This week was all about making it easier for people to try and use our site. Here are the few changes and tweaks we’ve implemented this week:

  • Registration will no longer require new customers to give us their valid e-mail address, and if you do, we won’t make you validate that address to log into our site. Customers will be able to login as soon as they create new account.
  • Now customers can login using ether their e-mail or user_name.
  • We also have created a Guest Scan page in the public portion of our site so anybody can try our scans. By clicking on a RUN button next to the scan’s name you’ll be able to run one of our public scans and see the results.

We also have added What’s New and How to pages to the site to improve communication with our customers. You can leave comments for any of the items there so please visit these pages, and let us know what you think. We will be reviewing your comments and hopefully getting new ideas on how to make our site better for our customers.

There is more in the pipeline, we are constantly updating our site, improving the services it provides, so, please come back, use it regularly and let us know how to improve it!!!

Good luck and happy investing!

SFOscanner Team

SFOscanner

SFOscanner was born to provide online trading and investment community with tools needed to search for investment and trading opportunities. There are over 25 thousand publicly traded stocks in United States, few of these get mentioned on CNBC or Bloomberg but most have very little visibility. SFOscanner is designed to search for stocks based on their performance, technical and fundamental parameters and analyst’s estimates. We collect data on all publicly traded stocks and options daily and give our customers ability to scan all this information, looking for stocks or options that satisfy selected criteria.

Virtually every financial and news site has stock screener page, but these pages are not designed well, their functionality is rudimentary at best and thus these pages are not usable.

SFOscanner is a different market scanning tool, it is designed to give customers the ability to build market queries layer by layer, our Query Builder interface allows our customers to build complex queries in a simple but structured way.

Please visit SFOscanner and give its market scanning functionality a test drive.

Good luck and happy investing!

SFOscanner Team

Going live

I’ve created SFOscanner.com because I couldn’t find a website with the market scanning functionality I was looking for. About a year ago I was trying to find a site where I could scan the stock market for growth stocks. Specifically I wanted to find stocks that grew faster than their current P/E ratio and I couldn’t find any site where I could enter such simple scan criterion. So to make a long story short, I started working on SFOscanner.com web site and in the beginning of September, 2014 the site went live! Now anybody interested in investing can search for trading opportunities using our site. And it is free to all! And we’ve been busy, in additional to constant bug fixes and overall improvements to the existing functionality, some very interesting features have been added.

The main feature that we added recently is Options scanning capabilities. Now SFOscanner customers can search for options contracts based on price, expiration date, open interest, etc. I am very excited about options scanning functionality, personally I have been trading options for many years and haven’t been able to find good options scanning tools online. So now I am the first customer of this side and welcome anybody to try it. It is not 100% where I would like it to be, but we are getting there. There are almost daily improvements and additions to the site. I will try to post updates here at least weekly to keep everyone in the loop on the SFOscanner progress.

Please try it, and give us your feedback, any comments or suggestions are greatly appreciated.

Good luck and happy investing!

D.R.