For immediate release: Monday 21 August 2006

IMA SUBMISSION TO FSA DISCUSSION PAPER 06/03 – IMPLEMENTING MiFID’S BEST EXECUTION REQUIREMENTS

Responding to the FSA Discussion Paper “DP 06/03 – Implementing MiFID’s Best Execution Requirements” the Investment Management Association supports much of the FSA’s thinking, while expressing scepticism about the proposals to use price benchmarks in dealer markets. It has proposed an alternative approach which it believes achieves the objectives of the Directive in a practical, workable way. 

Uncertainty has arisen over the exact responsibilities for best execution between different participants in the market, and in particular over whether the MiFID text imposes such a duty on dealers. The IMA’s view is that best execution is a process divided between the firms involved in the execution chain and that the MiFID text on best execution does, in some circumstances, apply a duty of best execution to dealers. The Association feels that it is vitally important to clarify this point and welcomes the FSA’s commitment to do so. 

In light of this, the IMA’s alternative proposal to benchmarking is that the FSA should “copy out” the MiFID text and provide some limited additional guidance to reinforce the principles that apply to dealers when executing client orders. Such guidance would cover the underlying principles applying to dealers when executing client orders and the factors which they might take into account when doing so – such as speed of execution, size of order and nature of instrument. Crucially, the dealer’s execution policy should deal with the handling of conflicts of interest. 

Sheila Nicoll, Deputy Chief Executive of the IMA commented:

“The issue of the responsibilities of the different participants in the execution chain is a crucial one and urgently needs to be resolved. The FSA needs to adopt an approach which will allow those firms in the execution chain to deal with their duty of care in different ways rather than seeking a one-size fits all solution.

We believe that the markets today serve our members’ needs well and are generally competitive: MiFID has raised some important issues which we need to face and resolve in a cost-effective way which does not damage a working market.”

A copy of IMA’s response to “DP06/03 - Implementing MiFID’s Best Execution Requirements” is attached.

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For further information, please contact:
Helen Stephenson, Communications Officer, IMA, 020 7831 0898

Out of hours contact:
Mona Patel, Head of Communications, IMA, 07834 089332