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.”