Best execution compliance: new techniques for managing compliance risk

Michael Mainelli and Mark Yeandle

Journal of Risk Finance, 2006, vol. 7, issue 3, 301-312

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: Compliance costs; European Union; Research; Financial control (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:15265940610664979

DOI: 10.1108/15265940610664979

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