Best execution propositions MiFID-compliant says FSA General Counsel

In legal advice on the scope of the best execution duty under the Markets in Financial Instruments Directive, the General Counsel’s Division of the FSA says that it does not believe that an investment firm is required to only ever quote the best execution price. Neither, the opinion contends, does the Directive ban dealing on an ‘RFQ’ (request for quote) basis, even if the client has not opted out of best execution or given a transaction specific instruction. It points, for example, to Article 21, which states “whenever there is a specific instruction from the client the investment firm shall execute the order following the specific instruction.” This provision would permit a client to perform its own due diligence on various firms and free the firm that it selected from the obligation of best execution by issuing a specific instruction, says the advice. The article wording would only make sense, it adds, if the firm was able to state the terms on which it was prepared to transact without constraint, rather than have to quote the best terms available in the market.