FSA releases policy statement dealing with best execution under Mifid

Regulator to clarify issues not addressed in CESR Q&A

The UK Financial Services Authority (FSA) has published a policy statement (PS07/15) that attempts to answer all final questions from respondents to FSA papers DP06/3 (covered benchmarking and internal models) and CP06/19 (proposals for the intelligent copy out for Mifid into the FSA Handbook) that deals with best execution requirements under the Markets in Financial Instruments Directive (Mifid).

The statement is divided into four sections: an overview, the CESR Q&A and feedback on issues it does not address, scope issues and specialist regimes. Even though the FSA agrees with all of CESR’s answers in its Q&A document, it attempts in this statement to answer any remaining issues.

The statement deals with questions concerning the requirements of the best execution policy, such as if it is necessary to obtain consent from clients for material changes to its policy, and if this can be done on the web. Other questions covered include whether firms can make contractual promises about execution quality to eligible counterparties (ECPs) without becoming subject to regulatory requirements for best execution, and related issues to ECPs among many others.

The FSA's policy statement also considers the scope of the best execution requirements in the context of quote-driven markets, retail clients and the spread-betting market. It also looks at the application of best execution requirements to specialist regimes.

The policy statement will be covered in full in the next issue of OpRisk & Compliance. To access the PS please visit the FSA website: http://www.fsa.gov.uk/pubs/policy/ps07_15.pdf