Last look: why a "filled" price sometimes isn't, and how to tell

[Shadow Trader]

Some liquidity providers keep a short window after receiving an order, from a few milliseconds up to a couple of hundred, to decide whether to accept it. During that window they can check where the market has gone. If price moved in the trader's favour, the fill may be rejected. If it moved against, the fill goes through.

That asymmetry is the whole point of last look. It protects the provider from being picked off by faster participants. It also means a scalper who is consistently right on very short horizons will see more rejections than someone who isn't.

The symptoms look like this: a burst of "off quotes" or "requote" messages on exactly the trades that would have been the best ones. The losers fill instantly, the winners bounce. Across a few hundred trades it shows up as a quietly worse expectancy than any backtest predicted, and a vague feeling that the broker has a talent for picking the wrong moments.

Firm pricing is the alternative. A venue offering firm liquidity commits to the quote it shows, with no second look. Fills happen at the price shown or with honest slippage, and rejections are rare. Not every venue works this way, and some retail brokers blend both types behind one feed.

Three ways to find out what a broker does:

- Ask support directly whether any liquidity provider uses last look, and how rejections are handled
- Read the order execution policy, which regulators often require brokers to publish
- Test it, by logging every rejection and checking what price did in the next second

The third one is the most honest. If rejected buys are followed by rising prices far more often than chance suggests, the rejections are cherry-picking.

Disclosure varies a great deal. Some brokers name which of their providers use last look and explain the hold times. Others say "deep liquidity from top-tier banks" and leave it there.

Has a broker ever given a straight answer about last look, or does it always turn into marketing language?