REGULATION

MiFID II best execution is not achievable, says FinTech experts

Panellists agree that perfect best execution can’t be achieved and describe it as a ‘relative term’.

By Hayley McDowell hayley.mcdowell@strategic-i.com October 06, 2016 11:10 AM GMT

Demonstrating perfect best execution under MiFID II regulation cannot be achieved, according to industry experts from the financial technology (FinTech) world.

A panel of FinTech veterans at The TRADE’s MiFID II: Best Execution in Paris this week told delegates that market participants may not ever reach best execution.

Mark Ford, principal consultant at LiquidMetrix, said: “The answer is, nobody is perfect and there’s no such thing as perfect best execution,” he said.

Founder and executive director at market surveillance firm Ancoa, Stefan Hendrickx, echoed Ford’s thoughts and described best execution as a ‘relative term’, as opposed to an achievable practice.

The European Securities and Market’s Authority defines best execution as a requirement for investment firms “to take all reasonable steps to obtain, when executing orders on behalf of clients.”

This takes into account execution factors like price, costs, speed, likelihood of execution and settlement, and size and nature of the order.

The panel also agreed that best execution is instead about improving the overall quality of trading.

LiquidMetrix’s Ford said: “Best execution is trying to identify the flaws or where more efficiencies can be gained. Where are the shortfalls and where is it costing the investor? It’s more about effective monitoring around that.”

Ancoa’s Hendrickx agreed that best execution policies bring more transparency to the buy-side and regulators can specially monitor that.