The FICC Markets Standards Board (FMSB)’s latest Spotlight Review explores the challenges faced in measuring quality of trade execution and how this varies across market participants and segments.
FMSB says that measuring and evidencing trade execution quality has become critical to both client servicing and demonstrating continuing compliance with investor protection regulations.
The review looks at the particular challenges faced by wholesale FICC markets in achieving high standards of fairness, openness and transparency and considers the cause of such challenges through the following topics:
- the observability of relevant data sources;
- the reliability and quality of data sources;
- variations in data observability and reliability across different products;
- obligations and priorities in measuring execution quality; and
- a role for industry standards.
The review highlights the importance of data quality and technological advances in enabling firms to effectively measure the quality of trade execution, and it sets out helpful focus points for firms. The review also encourages the industry to agree principles of best practice for measuring execution quality, noting that this could facilitate regulatory compliance and help drive efficiencies.