MiFID II and Best Execution

As the impact of MiFID II continues to take effect, the means by which companies measure best execution in fixed income markets are transforming.

3 Best Execution Changes Introduced By MiFID II

1. “All Sufficient Steps”

MiFID II introduces an obligation for firms to undertake all sufficient steps to achieve the best possible results for their clients when executing orders, raising the bar from “reasonable steps.” Under this new obligation, reviewing a sample of trades alone may not be considered sufficient.

2. Venue Analysis

Firms will be required to disclose their top 5 execution venues on an annual basis

3. Policy Disclosure

Execution policies must be disclosed to clients in an easy-to-understand format.

How Financial Professionals Think Their Firm Assesses Best Ex / Transaction Cost Analysis (TCA) Compliance

48%
Don't Know

34%
Use Internal System

18%
Use Third-Party System

Firm Checkpoint

Having a comprehensive best execution and measurement methodology is important to meeting MiFID II’s best execution obligations. A provider like ICE Data Services can help you meet regulatory obligations and assess trade execution quality without putting extra strain on your internal resources.


What Percentage of Trades are Reviewed by Firms

39% of firms reported reviewing less than 5% of their trades
17% of firms reported reviewing more than 5% but less than 20%
20% of firms reported reviewing more than 20% but less than 50%
24% of firms reported reviewing more than 50% of all trades
Firm Checkpoint

Your firm may need to increase coverage of trades reviewed in order to demonstrate that the intended outcomes can be successfully achieved on an on-going basis in connection with MiFID II’s “all sufficient steps” requirement.


The Primary Factor Firms Use to Validate Best Ex

Firm Checkpoint

Each of these factors is important, and each play a role in our evaluated pricing and best execution analysis at ICE Data Services to give you a comprehensive analysis. Our evaluated pricing methodologies incorporate relevant dealer quotes, comparable bonds and trades in the same issue into the evaluation process and together with our Best Ex service provide a comprehensive source for Best Ex validation.

How often are firms currently assessing Best Execution?

How often do they plan to assess Best Execution after the implementation of the MiFID II regime?

Firm Checkpoint

Internal best execution processes are frequently manual, requiring a heavy lift from firms. The ICE Data Service Best Execution process can free up internal resources, automate many parts of the process and provide timely reviews of close to 100% of your trades. This can enable you to monitor and assess compliance with your best ex policies on an ongoing basis.


A BEST EXECUTION SOLUTION THROUGH ICE DATA SERVICES

53% of firms anticipate having a final Best Execution solution in place within the next year. 24% within the next 6 months, 16% within the next 3 months and 7% within the next month.

In response to the rising demand for comprehensive, informed analysis of trade execution, we developed a methodology for supporting fixed income best execution work streams by applying our continuous evaluated pricing. At its core, our methodology provides a peer group analysis for every transaction. Our Best Ex score captures the relative quality of each transaction compared to all relevant market activity, and our continuous evaluated pricing service provides a comprehensive set of reference prices to fuel the analysis.

On average, our Best Ex service offers firms:

  • Coverage of close to100% of their fixed income trades
  • Annual cost savings
  • 3x more data points across which trades can be compared

Evaluated pricing, including continuous evaluated pricing, provided in the United States by Interactive Data Pricing and Reference Data LLC and internationally through Interactive Data (Europe) Ltd. and Interactive Data (Australia) Pty Ltd.

Interested in our MiFID II Solutions?

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