Best execution compliance: new techniques for managing compliance risk
Abstract
Purpose
New regulatory initiatives, principally MiFID and RegNMS, challenge wholesale financial firms to prove that they can provide best execution for their clients. This article aims to outline the background to the problem and suggest that current research into SVM/DAPR applications may provide a practical approach.
Design/methodology/approach
The article presents a desk review of current issues in “best execution” based on work with European brokers and others, followed by initial, promising trial of SVM/DAPR.
Findings
The article finds that brokers need automated tools, e.g. “sifting engines” that help them to focus compliance efforts on anomalous trades.
Research limitations/implications
Although brokers appear to need assistance in identifying anomalous trades, whether they place significant effort in compliance depends on regulatory enforcement.
Originality/value
MiFID and RegNMS will require changes in current practice. SVM/DAPR approaches appear to be worth further investigation.
Keywords
Citation
Mainelli, M. and Yeandle, M. (2006), "Best execution compliance: new techniques for managing compliance risk", Journal of Risk Finance, Vol. 7 No. 3, pp. 301-312. https://doi.org/10.1108/15265940610664979
Publisher
:Emerald Group Publishing Limited
Copyright © 2006, Emerald Group Publishing Limited