Firms fail in MiFID II best execution compliance

RegulationMany fund managers and brokers are failing to tighten up their dealing processes despite pressure from major capital markets regulations introduced nearly a year ago.

According to a survey, 65% of buy- and sell-side respondents do not monitor trades systematically according to ‘best execution’ criteria, despite a legal obligation to do so.

Best execution forms a major part of the revised Markets in Financial Instruments Directive (MiFID II), a regulation that reforms capital markets practices.

Cappitech, a regulatory technology firm, said it had surveyed over 100 buy- and sell-side compliance decision makers.

The research also found that 60% of respondents had no plans to use their best execution reports internally, even though the data would improve their execution quality, client offering and ability to make better informed business decisions, said Cappitech. 

“Many firms still don’t define their best execution policies properly, and many of those that do so don’t have a system to monitor their policies in a systematic fashion,” said Ronen Kertis, chief executive of the firm. 

Additional findings of the survey included firms being unclear about which financial instruments fall under MiFID II’s purview from a transaction reporting perspective. The view was that the European Securities and Markets Authority’s Financial Instrument Reference Database - which the regulator conceived to help firms understand their reporting obligations - was “complex and confusing”.

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