European RegTech leader MAP FinTech has underlined how RegTech companies can remain compliant with best execution obligations going forward.
The company highlighted that while best execution monitoring obligations are not new, there have been important changes such its introduction in MiFID I in 2007.
With the introduction of MiFID II in 2018, there was a change from reasonable to sufficient steps that should be taken by investment companies to make sure they obtain the best result for clients when executing orders – this change, MAP claims, has set the bar higher for compliance.
MAP FinTech said, “Moreover, MiFID II requires that investment firms monitor the effectiveness of their order execution arrangements and execution policy to identify and, where appropriate, correct any deficiencies. Firms must be able to demonstrate to their clients that they have executed their orders in accordance with the investment firm’s execution policy and demonstrate their regulatory compliance to competent authorities.”
The RegTech firm went on to note that companies should conduct monitoring to establish whether their execution of transactions delivers the best possible result for their clients. In order to establish this, MAP FinTech said that firms should take into account factors such as price, cost, speed, execution likelihood, settlement, size and nature and any other considerations relevant to order execution.
MAP FinTech added that the weighting of these factors should be dependent on the client’s categorisation – such as retail or professional – and that monitoring could be performed either with manual checks or by using RegTech solutions from providers who specialise on regulatory compliance.
The company highlighted that the benefits of using RegTech solutions are numerous, and included the benefit of avoiding human errors a key one. This is due to manual monitoring now always being accurate, while automated testing is performed by software that can ensure better accuracy and consistency levels.
Companies are also able to save time and resources as well as undergo frequent and continuous monitoring. Furthermore, RegTech solutions, MAP stressed, can help avoid inadequate or insufficient sampling and improves record-keeping capabilities.
Copyright © 2021 RegTech Analyst
Copyright © 2018 RegTech Analyst