Knowledge Base
Explain the best execution policy for orders placed under the most favorable conditions
Which of the following criteria is NOT explicitly mentioned as a factor of best execution under MiFID II regulation?
MiFID II regulation defines six criteria for best execution: price, cost, speed, likelihood of execution and settlement, order size, and order type. The criterion of 'market visibility' is not mentioned as a specific factor in this regulation.
Which document allows clients to verify the identity of the top five execution venues used by instrument class?
Execution quality reports published in accordance with RTS 28 allow clients to verify the identity of the top five execution venues used by instrument class. These reports are essential for assessing the quality of execution obtained by the service provider.
What is the definition of the 'cost' criterion in the context of best execution?
The 'cost' criterion encompasses all fees related to execution, including the service provider's commissions, trading platform fees, and clearing and settlement costs. This allows clients to understand that total cost is a crucial element in obtaining the best possible result.
The best execution policy must be reviewed at least every two years in accordance with regulations.
In accordance with Article 66 of Delegated Regulation 2017/565, the best execution policy is subject to review at least annually, not every two years. This ensures that the measures taken remain sufficient to obtain the best possible result for clients.
Systematic internalizers always execute orders under more favorable conditions than regulated markets.
Systematic internalizers execute orders against their own account under conditions at least as favorable as those available on regulated markets. However, this does not always mean they are more favorable. Regulation requires that these conditions be at least as favorable.
Categorize items by dragging them to the appropriate zones
Items to categorize:
Financial criteria
Operational criteria
Contextual criteria
Best execution criteria can be classified into financial criteria (price, cost) and operational criteria (speed, likelihood of execution and settlement). Order size and type can be considered contextual criteria, as they depend on the specific characteristics of the order.
'Nature' criterion in best execution
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The 'nature' criterion takes into account the specific characteristics of the order, such as the type of instrument or the particular conditions attached. This helps determine the most appropriate execution venue to meet the client's specific needs.
For non-professional clients, which aspect is emphasized when explaining the best execution policy?
For non-professional clients, the policy explanation emphasizes total cost, which includes the instrument price and all execution, clearing, and settlement fees. This allows the retail client to understand that seeking the best price alone is insufficient if associated fees significantly reduce the advantage obtained.