Asset managers have always had an obligation to provide “best execution” but they are now facing growing demand to demonstrate through quantitative and qualitative evidence they are obtaining the best results for their end-clients. It is not only MiFID II firms that are adjusting to the new landscape, asset managers across the globe are increasingly required to become “MiFID II friendly” not only to win new mandates but also retain existing ones, writes Charlotte Decuyper in the Market Structure & Strategy for EMEA at Liquidnet.
The end of April marked the second deadline for investment firms to publish their best execution reports from the preceding year. Liquidnet has reviewed the 2017 and 2018 “best execution” RTS 28 and Article 65.6 disclosures for equities from 70 asset managers to understand the level of impact on the execution landscape, as well as the challenges buy-side firms are facing in the production of these reports. One year after the introduction of MiFID II and it appears the separation of execution services from the provision of research is allowing firms to diversify their broker lists: while bulge bracket banks retain a sizeable market share, the rise of other types of liquidity providers and agency brokers is the sign of changing market dynamics.
Asset owners across the globe are leading the change and provision of greater transparency as a global standard. However, one of the remaining challenges for the regulators and industry to address is the access to complete, uniformed and standardized datasets to enable asset managers to process greater amounts of data and feed it back into their execution processes. Without access to fully transparent and accurate datasets, “best execution” risks remaining at the theoretical stage, rather than delivering real value.
Decuyper has just published a report titled What’s Next for Best Ex in which she examines the impact of best execution reports, required under MiFID II, on the execution landscape, as well as the challenges buy-side firms are facing in the production of these reports. She also looks at how the separation of execution services from the provision of research is changing market dynamics.