Clients likely to challenge 'best execution'

As the 1 November MiFID deadline is almost upon us, my inbox is being inundated with vendors' last minute words of wisdom regarding the much talked about Markets in Financial Instruments Directive.

One has to marvel at the PR strategies of some companies - bombard journalists with as many emails as possible, even if it is the same information that they were propagating about MiFID a few months back. Let's repackage it and hope no one notices, a bit like some of the so-called 'MiFID ready' solutions out there.

What surprises me though is that for a regulation that is lacking in "prescriptive" detail, vendors seem to know more about what firms need to comply with MiFID than firms do themselves. Is there a danger of firms installing all this whiz bang technology, only to find they did not need half of it?

Having said that Atos Origin's survey of the market suggests that firms have actually spent 20% to 25% less on MiFID than they initially intended and have not implemented smart order routing technologies, as suggested, because they are still unsure that liquidity will be as fragmented as some have suggested.

Vendors are eager to dispel the perception that they are flooding the market with technology which is simply a repackaging of existing solutions with a MiFID label slapped on it.

Some of them are even forming alliances (The Open MiFID Alliance comprising Allen Systems Group and vendors like Sun Microsystems, SAS and Gissing)where they purport to have put aside their "single-vendor" approaches and opted for a more "synergistic" approach.

I have to say though I am sceptical of some vendors trying to cash in on MiFID and the confusion that still reigns in the marketplace. But it appears no amount of "best-of-breed" technology is going to prevent firms from being fined for non-compliance with MiFID.

Well at least that is the expectation of firms surveyed by Thomson IFR which indicated that all firms expect fines for non-compliance as early as Q1 of next year, and 90% expect more fines every following quarter.

Despite all the rhetoric about "best execution" and what it means and solutions for addressing it, almost 70% of firms surveyed expect the first client to challenge their “best execution” in the first quarter of next year. Firms are not even confident about their own MiFID implementations, let alone the technology underpinning it.

Despite all the consultant-speak about MiFID being an opportunity to differentiate, it appears a number of firms are throwing technology at the problem and hoping it satisfies the regulators, without carefully considering what their strategy should be in a post-MiFID environment.