FCA Finds That Brokerage Firms Fail to Deliver Best Execution to Customers

Findings detailed in the latest FCA Thematic Review of Best execution and payment for order flow amongst 36 brokerages, are

fca_logo_fullAccording to findings detailed in the latest Financial Conduct Authority’s (FCA) Thematic Review of Best execution and payment for order flow, retail and professional clients are being failed by their brokers. The review has been conducted among 36 companies, including retail banks, investment banks, wealth managers, providers and brokers of shares in contract for difference and option brokers on the London International Financial Futures and Options Exchange (LIFFE).

The FCA has outlined that firms generally do not understand the rules of best execution practices and do not take into account client costs when executing their orders. Companies have not taken into account a range of factors such as price, speed and order size, to ensure consistent delivery of the best result when executing client orders.

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FCA’s Director of Markets, David Lawton, stated: “Firms told us that best execution is a simple commercial imperative – yet our review shows many firms unacceptably fail to put their clients’ interests first, undermining market integrity and inhibiting competition. The FCA expects to see firms act as good agents, placing equal focus on controlling client costs as delivering returns, and will take action where firms fall short of our standards.”

As Forex Magnates reported back in March, the FCA set out to review the practices of about 40 companies at the time, and now that the regulator has issued the findings from its review, companies are strongly encouraged to familiarize themselves with FCA’s Thematic Review on best execution practices.

The FCA states in its announcement that firms reviewed in the thematic sample will be provided with individual feedback on the regulator’s findings. The regulator will require firms to take immediate action and address all relevant areas lacking regulatory compliance.

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