Equities
well as BATS LIS which is due to launch in
December and BATS Periodic Auction Book
that launched in October 2015. Credit Suisse
is a supporter of the Turquoise platform, and
has its default smart order router turned
on to interact with that platform, among
others. “These initiatives can be seen as
part of a move to prepare for the MiFID II
world of 2018,” Cousens added.
Best execution
The concept of best execution is another
area of focus for Credit Suisse. While best
execution has been a familiar term ever
since MiFID introduced an obligation on
the sell-side to seek it in 2007, under MiFID
II that commitment is being reinforced by a
shift of the regulator’s attention to the buy
side. In particular, buy-side best execution
policies are being subjected to greater
regulatory scrutiny. At K&KGC’s 14th London
Equities Alpha Trader Forum in October,
one senior buy-side trader reported a
‘fact-checking visit’ from the FCA, in which a
representative of the UK’s financial regulator
wanted to know in great detail about the
firm’s best execution policy. In general, the
regulator is demanding a more detailed,
lengthy best execution policy which can
explain trading decisions with a level of
clarity greater than ever before.
Cousens says that Credit Suisse does
attempt to counter this factor by providing
more for the buy side than previously in
terms of data. Specifically, the firm uses its
data to help advise the buy side on how
to achieve performance enhancements.
But perhaps the best silver lining may be
provided by unbundling of payments for
research and execution, which stands to
benefit the smaller players as well as the
larger ones.
“Small buy-side firms can focus their
execution on a few key providers
with best execution and unbundling,
concentrating on the areas where they
stand to do better,” he said. “The more
they concentrate, the more data it will
generate for them. That data can then be
used to improve their performance even
further.”
Another potential problem with best
execution is the way regulators may choose
to interpret best execution obligations. For
example, does best execution simply refer
to ‘best price’? In Europe, it is understood
that the regulator is expecting more
nuance and explanation of what the trader
was