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In a 2016 survey by Linedata , 58 % of market participants said regulation was their greatest concern and MiFID II topped the list of regulations with the greatest impact .
These concerns stem from numerous causes , among them is cost . The implementation of the long-anticipated regulations is costing firms in both time and money .
The approach to best execution laid out in MiFID II aims to increase competition , improve standards in execution and make the whole process more transparent .
Richard Semark , head of European client execution strategy & head of UBS MTF , explains that there is more of a focus on the best execution process rather than just outcomes under the new rules .
Semark says the scope has been broadened by the removal of assumptions about what isn ’ t included .
He explains : “ Essentially this means an extension of best execution into all areas of trading , whereas historically it has been perceived as just an equity trading issue .”
REVISED REQUIREMENTS Article 27 of MiFID II states that investment firms are obliged to “ take all sufficient steps to obtain , when executing orders , the best possible result for their clients taking into account price , costs , speed , likelihood of execution and settlement , size , nature or any other consideration relevant to the execution of the order .”
This is a marked upgrade from the first iteration of MiFID where there was only a need to take “ all reasonable steps ”.
Semark says that this could mean higher expectations from clients on what brokers are able to provide in terms of connectivity , infrastructure and the execution platform .
“ Are they connected to all the right venues and are they operating in a sensible and smart way ?” he says .
“ From a buy-side point of view , I think there is the need to demonstrate that the reasons for choosing an executing broker are based on best execution .’’
Following ESMA ’ s MiFID II consultation , some respondents claimed that requiring an investment firm to establish the fairness of an OTC price would be very difficult .
ESMA has subsequently amended the technical advice
www . thetradenews . com THE TRADE MiFID II HANDBOOK | 7