Definition of best execution

The Markets in Financial Instruments Directive (Mifid), launched in November 2007, is the European initiative to promote competition and enhance choice for investors across Europe. [1]

It requires brokers to achieve “best execution” for their clients - typically so-called “buyside” investors like asset managers. [2]

This means brokers and dealers are obliged to obtain the best possible result of a trade for a client, taking into account not just price but costs, speed, likelihood of execution and settlement, size, and other considerations. [3]

However, Mifid never spelled out how to achieve best execution. The result is that brokers write their own best execution policies, which may differ from one to another. [4]

Quick View: Mystified by Mifid
Private investors fail to see Mifid benefits
European Union: Competition is sharper but liquidity fragmented
Jury still out on Mifid’s impact
In depth: Mifid

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