MiFID for Traders 2007

Points covered in this Presentation Best Execution Fair Allocation Timely Execution Order Aggregation Records

Best Execution

What is Best Execution? “ A firm must take all reasonable steps to obtain, when executing orders, the best possible result for its clients taking into account the execution factors” Source: NEWCOB R

Best Execution Overview Best Execution Another firm can request Professional Client Status, firm decides Proprietary Models can be used for setting prices Applies to Client Orders executed as agent or principal Buy side can rely on Sell side if takes reasonable steps Customer instruction is best ex – even if not best price Firms must have “Execution Policy” with chosen execution venues Disclosure of policy to Clients and demonstration of it on request No duty if client requests the quote

Best Execution – Request for Quote “If a firm provides a quote [at its request] to a client that would meet the firm’s obligations to take all reasonable steps to obtain the best possible results for the clients if the firm executed that quote at the time the quote was provided.” Note: Quote must not be stale. Source NEWCOB G

Best Execution – the Firm’s Policy [To whom, and in what circumstances, will firm provide best execution-from the firm’s best execution policy.]

Best Execution – the Firm’s Policy [What factors are taken into account, and in what priority, for different types of security and client, in the firm’s policy.]

Best Execution – the Firm’s Policy [The two stages in developing the firm’s policy in selecting execution venues. The firm’s selection of venues and what traders need to take into account in selecting the venue from the firm’s list for a specific client order. Case studies recommended.]

Best Execution – the Firm’s Policy [How to demonstrate the achievement of best execution under the firm’s Policy, subject to client instructions, taking into account thinly traded investments and OTC transactions. What records should be kept.]

Other Order Execution Changes

Order Execution – Fair Allocation [Any changes to the firm’s fair allocation Policy]

Order Execution – Timely Execution [Any change to the firm’s Policy]

Order Execution - Aggregation [Any changes to the firm’s aggregation Policy.]

Record Keeping

Records [Any changes to the Firm’s Record keeping procedures e.g. 5 years records of all MiFID business orders and transactions.]