[ A D V E R T O R I A L ]
Meeting your best
ex obligations:
How do you see the
wood for the trees?
Gareth Exton, head of execution consulting at Liquidnet, explains
why analysing liquidity, mechanics and protection provided by
counterparties is key to evaluating best execution under MiFID II.
T
he past year has been a period
of significant change for equity
trading as a result of MiFID II and
all the structural changes it has
introduced. Whether it be from the
increased scrutiny over operating
procedures through enhanced
Best Execution requirements, the
introduction of new venue types or
changes to the trader’s workflow
through increased automation and
the use of new tools, all of these
have changed the accepted norms
and challenged the conventional
thinking on what works and what
doesn’t.
Therefore, how do we cut
through the often conflicting
sources of information and data to
24 // TheTrade // Winter 2018
really see the wood for the trees
and understand what’s working
and what isn’t?
Why is it important to review?
Before we dive headlong into the
analysis, we should understand
why it is important to do this
analysis, because as is often the
case with formidable challenges, it
might seem easier to assume every-
thing is fine and to therefore move
on to less challenging tasks.
MiFID II extended the require-
ments of firms to demonstrate
Best Execution by ensuring firms
monitor their execution counter-
parties and fully understand their
operating procedures. Further to
this, the FCA were clear in stating
that trading desks should know
how their traders are interact-
ing with the market, particularly
through algorithmic trading. 1
To fulfil these requirements,
firms should have a very clear
framework for the continual
evaluation of counterparties that