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Capital Markets

Regulation: FSA reprieves fixed-income market on Mifid’s best execution

UK-based bond dealers breath sigh of relief as regulator turns back from proposals set out eight months ago.

UK regulator the Financial Services Authority has turned back from proposals set out in a discussion paper published last May on how it might implement the EU’s forthcoming Markets in Financial Instruments Directive’s provision on best execution. London-based bond dealers will be breathing a sigh of relief on the news since it means that they should be able to continue providing liquidity to their clients.

Best execution requires dealers to get the best result for clients, in terms of price, speed, costs, likelihood of execution and any other factors that influence a deal. It is just one small part of Mifid, which will replace the EU’s Investment Services Directive in less than 12 months’ time and introduces new, wide-ranging obligations on how market participants should conduct business.

The FSA has started to disseminate to market participants a statement that it will not enforce the principle of best execution for non-exchange traded markets. This follows an overwhelmingly negative industry response to the regulator’s suggestion that it was possible to put into practice best execution in the fixed-income sector.

Position

On November 27, Chris Hibben, head of Mifid implementation at the FSA, told a conference, organized by EA Consulting Group, of the regulator’s latest view.

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