Italian IT vendor SIA claims to have launched the first platform in Europe to verify and assess best execution, to enable securities market firms to monitor and control their operations in compliance with the Markets in Financial Instruments Directive (MiFID).
SIA has added a MiFID Execution Policy for Monitoring Module to its SIA-EAGLE platform, which is already being used by more than 50 Italian and foreign financial firms, including banks, broker-dealers, fund managers and even utilities and regulators. The platform has been implemented, for example, at the Ministry of Finance of the Czech Republic.
“In Italy, in particular, the abolition of the ‘concentration’ principle on share exchanges, the certainty of “best execution” – i.e. the need to achieve the best possible outcome for the customer – and the more stringent pre- and post-trade transparency requirements, mean that the operator is required to integrate, consolidate and compare, in an effective and timely manner and at sustainable costs, the numerous information flows relating to the investment transactions carried out on behalf of various types of customers, using different types of financial instruments and markets,” says SIA in a statement. “In fact, through the new Execution Policy Monitoring for MiFID module, financial operators will be able to automatically analyse all the transactions carried out on the various European financial markets and show to the customer, whenever he asks for it, that the best possible terms available at the time were obtained, in line with the execution strategy agreed by the financial operator and the investor.”
The new Module also aims to facilitate compliance with the contractual terms agreed by firms with their clients. Summary indicators will warn of transactions that fall outside the execution strategy. Control algorithms will point out the particular factor defined by the execution policy – such as price, explicit costs, implicit costs such as market impact and opportunity cost, speed and probability of execution as well as probability of settlement – that does not comply. “Such verification is performed by taking into account the various types of executed orders, class of financial instruments, client segments, trading venues and market regulations, as well as the execution path,” says the SIA statement. “Furthermore, this module verifies that the best terms obtained for an investor are the same that were obtained for other investors with the same execution strategy.”
SIA says the Execution Policy Monitoring for MiFID module will be available from January 2007. MiFID will be adopted that month, and enforceable from November 2007.