The Implementation of European Best Execution Obligations - An Analysis for the German Market -

Abstract

Since 01 November 2007 the provisions of the “Markets in Financial Instruments Directive” (MiFID) have to be applied by investment firms and regulated markets. This key date marks the (provisional) completion of a legislative process of the European Union which took several years. One major aspect of regulation concerns the best execution of client orders. Investment firms are obliged to make adequate provisions including processes and IT systems for order routing to achieve the best possible result (“best execution arrangements”) and to disclose sufficient information of the most important measures to their clients (“best execution policies”). This paper presents the results of an analysis of 75 best execution policies from the 100 largest German financial institutions and the 15 largest online brokers in Germany with regard to the fulfillment of the statutory minimum requirements, identifiable “best practices” and the execution venues on which investment firms place significant reliance in meeting the best execution requirement.