Although the MiFID II came into force at the beginning of 2018, most of the industry players are yet unprepared to formalize the best execution process, among other tasks to tackle the biggest regulation challenge in recent times.
That’s according to a new survey conducted by Cappitech, a Fintech boutique offering bespoke solutions to both the buy- and sell-side, which included over 100 European compliance executives. The study assessed the shakeup to the multi-trillion-dollar markets under the European Union law with a greater focus on Best Execution and RTS27/28 requirements, which apparently were shelved in favor of speed and rushed delivery.
In fact, Cappitech survey found that 65 percent of respondents considered themselves not monitoring trades “systematically according to best execution criteria.” The other side of the challenge is the lack of internal expertise, which often causes firms to forgo seeking more efficient solutions, with 60 percent indicating they have no plans to use “their Best Execution reports internally.”
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Quick-fix solutions were not effective
The findings reflect MiFID II’s complexity and that the delay of implementation is still a major risk, even though more credibility is being voiced every day. For example, the surveyed executives acknowledge that data would improve their execution quality, client offering and ability to make better-informed business decisions.
Despite the fact that MiFID II has been around for more than 11 months, many firms are still in a position to adopt a wait-and-see approach. This confirms that there was a lack of time to look for long-term or strategic solutions to set up the appropriate compliance and data governance structures. Instead, many felt pressured to find a quick-fix, short-term solution only to reduce regulatory risk.
In addition, the findings from the survey obviously point to that without focusing on the bigger picture for real change, the same problems and mistakes made under previous regulations are repeated.
Commenting on the findings, Ronen Kertis, CEO of Cappitech, noted: “Many firms still don’t define their best execution policies properly, and many of those that do so don’t have a system to monitor their policies in a systematic fashion. Furthermore, the operational processes in many cases continue to be unnecessarily laborious and complex. Industry participants need a single point for all compliance needs across reporting, execution quality analysis, service, ARM and Trade Repository integration and reconciliation.”