What it means
Last-look is a controversial execution practice where market makers reserve the right to reject incoming aggressor orders within a short window (typically 50-200ms) after the order arrives. If price has moved against the MM in that window, they reject (or requote). If price moves in their favor, they accept. The asymmetry means takers face negative-EV execution: positive moves are filled, negative moves are rejected.
Why it matters
Last-look is the single largest hidden cost on many FX ECN venues. Studies estimate cost at 0.2-0.5 pip per round-trip on majors for aggressor flow exposed to last-look — material on any strategy with thin edge. The practice is being progressively restricted by venues (FX Global Code, ESMA scrutiny) but persists in many liquidity arrangements.
How to use it
When evaluating ECN brokers, ask explicitly: is last-look applied to my orders? What's the reject rate by time of day? What's the time window? Brokers committed to 'firm liquidity' execution (no last-look) advertise it. For active strategies, the difference in realised slippage between firm and last-look venues is often 0.3-1 pip per round-trip — meaningful at strategy scale.
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