Fixed income markets are undergoing significant change, both in market structure and liquidity. Impending regulatory reform coupled with an increased focus on greater transparency and efficiency around trading costs are driving demand for performance measurement tools that help investment firms evaluate the quality of their execution and prove best execution, such as Transaction Cost Analysis.
The UK’s Financial Conduct Authority (FCA) appears to be leading the charge on best execution. The regulator expects all firms to be aware of enhancements to best execution monitoring, and assess whether they are suitable and proportionate for their business model. Its 2014 Thematic Review generally outlined good practice, but also indicated that the industry struggled to implement best execution requirements.
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