Best Execution


Best execution in the UK is governed by the Conduct of Business Sourcebook as well FCA Principle 3 (risk management systems and controls) and Principle 6 (treating customers fairly). A recent Thematic Review by the FCA found that retail and professional clients are being failed by firms that don’t properly apply the rules on best execution when trading on their behalf.  

The FCA concluded that “not enough is being done by firms to ensure best execution is being consistently delivered to clients”, and made clear that it will be paying close attention to monitoring capability in further best execution reviews. The FCA also emphasized that it expects “senior management with responsibility for trading activities to take greater responsibility for ensuring that policies and arrangements remain fit for purpose.”

In March 2017 the FCA outlined findings from recent supervisory work, noting that “Investment Managers are still failing to ensure effective oversight of best execution.”

The FCA found that “best execution monitoring in fixed income was less sophisticated than in equity trading” but that “some firms have been more proactive in how they meet their obligations than others” and noting that this “highlights that meaningful steps can be undertaken to ensure best execution even in less transparent markets” such as the FX sphere.  The FCA concluded that we “expect all firms to be aware of enhancements to best execution monitoring as they become available and assess whether they are suitable and proportionate for their business model.”


The PRIIPs Regulation will be directly applicable within the European Union (EU) from 1 January 2018 and will not require transposition by domestic United Kingdom (UK) legislation. This regulation will oblige manufacturers and distributors of products that fall under it to provide a Key Information Document (KID) that clearly describes the product features, costs and risks to retail investors before they invest.  Following the UK leaving the EU, the FCA has noted that the PRIIPs Regulation will form part of the body of EU legislation that is converted into UK law.  The BestX® FX Best Execution Analytics can be a substantial aid in meeting the PRIIPS regulations as relate to FX.    The application will allows users to assess the FX price received against an independent consolidated measure of the mid price in accordance with the RTS. 

FCA’s disclosure rules following application of PRIIPs Regulation
May 2 2017

PRIIPS Regulation
Nov 26 2014

PRIIPS Regulatory Technical Standards (RTS)
Mar 08 2017

Asset Management

On June 28 2017 the FCA released its Asset Management Market Study Final Report (MS 15/23) in which it proposed an overall package of remedies to make competition work better, and protect those least able to actively engage with their asset manager.  The study found that on trading and execution costs, "most firms did not have adequate management focus, front office business practices or supporting controls to meet our current requirements on best execution". The study also found that firms can earn significant administration fees on top of the AMC. The package of remedies will increase the transparency of costs so that those seeking information can get it.   

The study emphasised the changes due to come into place at the start of 2018 under PRIIPs and MiFID II. "The new provisions under MiFID II go beyond what is currently required and will introduce new requirements for firms to provide aggregated and on-going information on all costs. Firms will, where applicable, need to provide the aggregated information to the client on a regular basis, at least annually, for the lifetime of the investment. Firms must also provide an itemised breakdown of costs when the client requests it. These changes will give consumers greater understanding of the full costs and charges of the investment products and services that they are buying. Both PRIIPs and MiFID II will require firms to calculate and disclose indirect costs such as transaction costs and to present charges as a cash amount in cost disclosure documents. This will allow the client to understand the overall cost as well as the cumulative effect on the return of the investment." To learn more, please see the FCA Asset Management Study website.

The study also highlighted that reforms under MiFID II mean that there will be greater obligations around best execution for asset managers. The new, more comprehensive best execution provisions in MiFID II will also strengthen the content and quality of disclosure to clients. Asset managers will be expected to step up their efforts to obtain the best possible result for their clients when placing orders with brokers on behalf of their clients. They will also be required to provide greater transparency on execution quality including the top five entities to which they sent orders for execution in the preceding year. The FCA noted that there is also an expectation that these requirements will increase firms’ monitoring of their own execution quality.

FCA's Asset Management Market Study Final Report (MS 15/2.3)

FCA publishes final report into asset management sector

Investment Managers still failing to ensure effective oversight of best execution

BIS: Foreign Exchange Working Group

Financial Stability Board (FSB)

Bank of England

Financial Conduct Authority (FCA)

Markets in Financial Instruments Directive / Regulation (MiFID / MiFIR)

MiFID II European Commission Delegated Acts

European Commission

ESMA Q&A on Investor Protection under MiFID II
Nov 10, 2017

MiFIDII translations on transaction reporting, order keeping and clock synchronization (Corrected)
Oct 10, 2017

ESMA - Final draft RTS on the trading obligation for derivatives under MiFIR
Sep 28, 2017

MiFID II transitional transparency calculation
Sep 11, 2017

ESMA clarifies traded on a trading venue under MiFID II
May 22, 2017

Commission Delegated Regulation 2017/583 on markets in financial instruments with regard to regulatory technical standards on transparency requirements - Official Journal of the EU
Mar 31, 2017

Commission Delegated Regulation 2017/585 on data standards and formats for financial instrument reference data supplementing MiFIR - Official Journal of the EU
Mar 31, 2017

Commission Delegated Regulation 2017/576 on regulatory technical standards for the annual publication by investment firms of information on the identity of execution venues and on the quality of execution (RTS 28 - Top Five Execution Venues)  - Official Journal of the EU
Mar 31, 2017

Commission Delegated Regulation 2017/565 on organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive (defining spot and derivative contracts relating to currencies) - Official Journal of the EU
Mar 31, 2017

Consumer Financial Services Action Plan: Better products and more choice for European consumers
Mar 23, 2017

ESMA issues implementing rules for package orders under MiFID II
Feb 28, 2017

ESMA writes to European Commission on MiFID II systematic internalisers operating broker crossing networks
Feb 14, 2017

ESMA revises MiFID standard on position reporting
Feb 9, 2017

ESMA issues briefing on transaction reporting requirements under MiFID II
Jan 2017

Delegated Directive with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits
Apr 7, 2016

Delegated Regulation with regard to definitions, transparency, portfolio compression and supervisory measures on product intervention and positions
May 18, 2016

Regulatory technical and implementing standards – Annex I (Draft)
Sep 2015

MiFID II Directive 2014/65/EU
May 2014

MiFIR Regulation (EU) No 600/2014
May 2014

Best Execution application to UCITS management companies
May 2008

Best Execution under MiFID
May 2007

MiFID I Directive 2004/39/EC
Apr 2004