Alongside pending MiFID II regulation, the UK’s Financial Conduct Authority in November 2016 published its interim Asset Management Market Study, which signalled renewed focus on asset managers’ best execution obligations.
As well as considering how firms control the cost of research, we have also looked at how firms are approaching their best execution requirement.
(FCA: Nov 2016, cl 7.60)
The Asset Management Market Study mentions an overall “high level trading strategy” that firms should have with an effective governance process:
…The firms which demonstrated a decrease in the cost of equity trading in recent years showed an increase in the use of low cost trading venues such as broker‑supplied algorithms, direct market access and the increasing use of crossing networks for appropriate trades. These firms had an effective governance process in place that challenged the overall costs of execution, renegotiated commissions on an annual basis and could identify trends that helped improve future execution and fed into a high level trading strategy.
(FCA: Nov 2016, cl 7.61)
We can help by challenging some of the overall implicit costs of trading and identify trends that improve future execution by constantly evaluating the data and sharing it with our clients to discuss and see where we are successful or unsuccessful. We do this now with one of our largest clients in London each quarter. It is impossible to always get it right, but if you can demonstrate that process of ongoing evaluation, the FCA and your clients should be very satisfied. Standard TCA will not be sufficient.
All the firms we visited had management information that allowed them to accurately view equity execution costs. However, the way these data were used was mixed and not all firms could demonstrate the improvements they had made to their execution process based on these data.
(FCA: Nov 2016, cl 7.62)
How we can help
CF Global combines best-in-class trading technology with advanced transaction reporting and tailored commission management services to help our clients reduce both explicit and implicit trading costs.
- Our live traders accesses more than 50 electronic venues, both dark & lit, multiple broker algorithms, as well as crossing networks and smart order routing technology
- We leverage our network of more than 200 brokers who share information, flow lists and actionable IOIs’s with us, so that we can trade more intelligently / effectively on behalf of our clients
- Broker-neutral transaction reporting allows us to evaluate the venues we select, so that we fine-tune our trading process for clients
- We’re independent and have no proprietary book, so we don’t internalise client orders and have no conflict of interest