LONDON, Feb 22 (Reuters) - British fund managers will require banks and brokers to explain why they pull out of a foreign currency trade at the last minute under new guidelines published on Thursday.
The Investment Association, whose members manage 6.9 trillion pounds ($9.58 trillion) in assets, wants greater transparency when banks and brokers suddenly pull out of a currency trade in London's $2.2 trillion a day FX market.
This marks a ratcheting up of pressure on banks and brokers that trade currencies as central banks are already cracking down on the practice known as "last look" in a new voluntary code.
Regulators are taking a more rigorous approach to FX trading practices after banks were fined billions of dollars for alleged rigging of currency benchmarks.
The IA said it has identified a number of instances where "last look" should be stopped, given there is a potential for misusing commercially sensitive information.
"Investors have long been concerned about the lack of transparency around last look," Galina Dimitrova, director of investment and capital markets at the IA said in a statement.
"We want to ensure that the FX markets are fair and effective as this benefits investors by enabling asset managers to make efficient and productive investments on their behalf."
The trade body said funds often do not receive notification or an explanation when individual trades have been rejected.
Under the new guidelines, banks and brokers should explain why the trade has been declined, drawing from a proposed standard set of reasons, including speed, price improvement, internal credit checks, and price tolerances, the IA said.
Central bankers are looking at how to monitor the increasingly fragmented FX market as trading moves to a plethora of electronic platforms, making it harder for investors to get a simple, overall view of prices on offer. ($1 = 0.7203 pounds) (Reporting by Huw Jones; editing by Alexander Smith)