Markets

Will Barclays' "Last Look" Practices Face $100M Penalty?

The "last look" feature was started as a measure to safeguard market makers against wide price fluctuations led by the time lag between placing and executing an order in the foreign exchange ("FX") market. But this same feature has now begun to weigh upon the banks' legal reserves. Notably, the feature has added a new dimension to the regulatory investigation into FX practices of global banks, more importantly, of London-based Barclays PLCBCS .

In May 2015, Barclays had shelled out $2.4 billion to settle FX-market rigging charges brought against it by the United States Department of Justice ("DOJ"), along with other regulators, including The New York Department of Financial Services ("DFS"). However, the bank has been probed separately by the DFS for taking undue advantage of the last look feature included in its electronic trading platform. In fact, it might have to pay a $100-million fine to resolve this issue. The news was first reported by The Financial Times.

Per the source, DFS' investigation relates to the bank's misuse of the last look feature to cancel FX trades at the last minute in case the market turns unfavorable. As a result of such practices, Barclays has reportedly gained "unfair advantages over clients and counterparties through its forex trading platform".

Notably, Barclays has already paid $485 million to the DFS as part of the afore-mentioned DOJ probe. However, further investigation into the bank's electronic trading platform is anticipated to ramp up its legal costs.

Nonetheless, an early settlement is expected to work in the company's favor as John McFarlane, Chairman at Barclays, seeks to resolve "legacy and conduct issues" as quickly as possible.

Earlier in November, the bank agreed to settle litigations pertaining to the manipulation of benchmark interest rates. The company will have to pay $94 million and $120 million for rigging Euribor and LIBOR, respectively.

Separately, German lender Deutsche Bank AG DB has also come under DFS' regulatory scanner, and will likely reach a settlement in 2016.

Barclays currently holds a Zacks Rank #2 (Buy). Investors interested in the foreign bank stocks can also consider Banco Macro S.A. BMA and Grupo Financiero Galicia S.A. GGAL , both sporting a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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