The Securities and Futures Commission (SFC) today issued a circular setting out guidance on the standards of conduct and internal controls the SFC expects of licensed corporations (LCs) in delivering best execution. This follows a thematic review of selected LCs which assessed the effectiveness and adequacy of arrangements for delivering best execution.
The circular reminds LCs that they should execute client orders on the best available terms, as delivering best execution is fundamental to market integrity and the protection of investors who rely on LCs to act in their best interests. This is particularly important in light of the increased speed and complexity of trading, as execution is now mainly automated and electronic and LCs offer multifaceted products and services including many with unique features.
The SFC expects that LCs should put in place arrangements, including controls, monitoring and management supervision, to obtain the best available terms, and should subject these arrangements to periodic review to ensure best execution is delivered consistently.
Clients rely on brokers to execute orders in different asset classes ranging from shares and debt instruments to investment products with unique features,” said Ms Julia Leung, the SFC’s Executive Director of Intermediaries. “To deliver best execution, firms should take into account a range of factors including price, cost, speed and likelihood of execution.
Also today, the SFC issued its Report on the Thematic Review of Best Execution to provide detailed observations from the thematic review and highlight good industry practices for LCs to take into consideration.