BEST EXECUTION RTS (June 2016)

The adoption of RTS relating to reporting of Best Ex should give warning of the far-reaching effect this will have on liquidity providers. Preparation for this obligation should be addressed sooner rather than later, given the array of elements that are impacted.

1. The RTS look not only to organised trading venues such as MTFs and OTFs, but also Systematic Internalisers, market makers and other liquidity providers. (And as noted previously, many firms will be impacted by the SI regime given the threshold being applied to the single instrument level. Basically if the firm has any sort of USP in a given currency/instrument they may well be drawn into having to operate an SI)

2. Separate reports are required for different segments and different order books

3. The liquidity provider obligation applies whether or not part of a formal market making agreement. If you are holding yourself out as 'willing to deal on own account', that will do.

4. This seemed important enough to quote directly: "Likelihood of execution indicates the probability of execution of a particular type of order and is supported by details on trading volumes in a particular instrument or other characteristics of orders and transactions. Information on likelihood of execution should allow for the calculation of metrics such as the relative market size of a venue in a particular financial instrument or a class of financial instruments. Likelihood of execution should also be assessed with data on failed transactions or cancelled or modified orders."

The wider set of expected details are set out in the RTS. Lets get to work!