Best execution remains the biggest challenge for firms putting together MiFID policies, a discussion group found.
Members of the Financial Services Discussion Club say making sure they meet the range of conditions of best execution is giving firms the biggest headache.
MiFID – the Markets in Financial Instruments Directive – comes into effect in November, when it will replace the Investment Services Directive (ISD).
It aims to set out some basic high-level provisions governing the organisational and business conduct requirements that should apply to firms.
Best execution sits under article 21 of the directive. It states financial services firms carrying out transactions on their clients' behalf: ‘must take all reasonable steps to obtain the best possible result, taking into account price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order.’
However, members were particularly concerned about synchronising best execution policies between buy-side and sell-side firms.
They said many buy-side firms were waiting on information from sell-side counterparts in order to put best execution policies together and were concerned at the diminishing time-frame available to them to complete this part of the project.
Representatives of mid-tier financial services firms in the UK attended the club, which was chaired by Rob Nieves, director at accountancy firm KPMG.
The group, which meets monthly to discuss MiFID related issues, also highlighted traders’ increased responsibility to document that best execution policies have been followed.
Nieves says: “Best execution has been the most discussed area of MiFID since the directive was first proposed.
“Liaising between the buy-side and the sell-side and documenting policy adherence will require significant process changes and re-training across departments if this element of MiFID is to be successful.”
Naomi King of Clearconcepts, which administrates the discussion club, adds: “Best execution has been the most topical area of MiFID discussion this year. The work put in already by firms has been considerable, but it is clear there is still much more to be done before the November deadline.”
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