[ S U R V E Y | E X E C U T I O N M A N A G E M E N T S Y S T E M S ]
EXECUTION BEYOND COMPLIANCE
MiFID II may have changed the game when it comes to execution management , but trading efficiency will always come first .
In last year ’ s Execution Management Systems Survey ( EMS ), The TRADE examined if compliance was becoming the new battleground as the introduction of MiFID II across Europe drew closer . EMS providers were working hard to build up their front-office compliance capabilities before the start of the year and that work has continued well into 2018 in response to the needs of their buy-side clients .
The introduction of new rules for firms to demonstrate best execution for all transactions was of course a major game-changer for buy-side traders , who must now be more aware of their regulatory obligations at every step of the trade process , especially when it concerns execution . However , traders will invariably act on instinct and will want their performance to be judged on more than its compliance merits .
The 2018 edition of the EMS Survey was conducted around six months into the MiFID II regime and the compliance element will have played a large part in how respondents have rated their EMS providers as enhancements will have come into effect .
Figure 1 shows the scores seen in the survey in each of the past five years for the 13 categories respondents were asked to review . Overall scores remained at a good level in this year ’ s survey , with all 13 categories under scrutiny scoring above 5.00 ( a good , or “ default ”, score ), while the overall survey average rose to 5.56 , the highest level at any time during the last five years and a 0.08 improvement on last year . Almost all of the areas of service ranked by respondents showed improvement on last year ’ s results , with only three categories showing an incremental decrease so small as to be largely insignificant . There were noticeable increases in scoring within the breadth of broker algorithms and overall cost of operations categories – up 0.22 and 0.24 respectively on last year . Systems cost was always going to be an important factor for respondents this year as expenditure on dedicated compliance systems has increased substantially over the past two years in the run up to MiFID II , and respondents seem to have acknowledged vendors ’ efforts to accommodate this . The highest-scoring category this year was for reliability and availability , always one of the keystones of a successful EMS , at 5.91 , although this has been a consistent level of scoring over the past five years .
The product development category , which suffered a dip in score in the 2017 survey , also returned to a more respectable score , although it was still the lowest-scoring aspect of service in this year ’ s survey . Clearly , compliance mandates have distracted vendors from innovating their front-office products in execution terms , although it would be reasonable to expect them to turn their attention back to this area now that Mi- FID II is firmly bedded in .
As has been the case in previous years , the majority
66 // TheTrade // Autumn 2018