SEFs Best execution for new asset classes

Broadening best execution

MiFID II expands SEFs best execution rules beyond equities to include most asset classes. In advance of a transaction, you need to establish and explain the venues, liquidity and pricing strategies you’re using.

Talk to us today
Fishing along coastline
REUTERS/Rogan Ward

Justifying your execution strategies

If you’re executing client orders, MiFID II requires you to establish and agree on policies with your professional and retail clients about how you will achieve best execution in advance.

This includes:

  • Venues you will trade on directly
  • The  liquidity partners, banks and brokers you will use to source liquidity or provide execution services
  • Access to sales traders, algorithms or direct market access and under what scenarios

In each of these scenarios, you have to record and monitor performance as your clients can demand evidence of best execution at any stage. You have to be able to replay scenarios and justify your trading decisions.

Separate the signal from the noise

Data is a huge challenge for demonstrating and documenting best execution actions. It’s not the lack of data, but the sheer volume of it. You have to efficiently identify, filter, and leverage the exact data you need for monitoring and improving trade execution.

How do you:

  • Process and analyze the volumes of best execution data and reports provided by execution venues and liquidity providers
  • Find a price for less liquid products where referential pricing and trade data is sparse?

The bottom line is that you will need to look for alternatives sources and proxies.

A key partner for best execution

We have a powerful set of proven tools for choosing sources for liquidity and helping monitor venue performance, both historically and in real-time.

Eikon already provides cross market liquidity views for individual equities with both the .x RIC, providing a pan-European Best Bid/Offer and Time and Sales, and the Blended Order Book object, providing a customizable view of the cross-market order book.

Eikon also provides access to the Thomson Reuters European Market Share Report, an on demand reporting tool that provides historical insights in how individual instruments have been traded across Europe. These and other powerful new views and analytics will extend these aggregation capabilities to incorporate the full range of new trading venues and liquidity sources launched in the post-MiFID environment.

Fixed income securities can often pose a challenge for pricing, benchmarking and proving best execution. Thomson Reuters Pricing Service provides an independent, global evaluated pricing source covering over 2.5 million fixed income securities, derivatives and bank loans. With over 100 evaluators across the world, the service offers true global coverage with local knowledge, applying consistent and transparent pricing for all evaluations.

Tick History provides even greater resolution to historical data, providing the ability to replay over 10 years' worth of tick-by-tick data across the range of global asset classes.

Thomson Reuters Velocity Analytics is a deployable platform that will also provide a true multi-asset Transaction Cost Analysis capability.

More about our solutions