Barclays FX trades facing US review
Market-makers may be the next target of US regulators as Bloomberg reports that prosecutors and the SEC have asked Barclays for information on its electronic trading platform.
It's related to provisions that allow market-makers to reject trades within a very short period of time after 'execution' if the trade is deemed unfavourable. Buy-side market participants have been complaining about the practice.
Essentially, they quote a price (usually on an electronic platform) and then when a trader tries to execute the trade, it's rejected.
The way I understand it, in theory, a market maker could use the moments between the trade being executed and the execution to see what way the market has moved. If it's gone their way, they accept it; if it's gone against them, they reject it.
