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{{ | {{a|cobs|}}The vexed question of how clients consent to a {{tag|best execution}} policy in general, and provide permission for their orders to be handled away from regulated exchanges in particular, is covered in COBS {{cobsprov|11.2.25}} and {{cobsprov|11.2.26}}. As we shall see. | ||
The vexed question of how clients consent to a {{tag|best execution}} policy in general, and provide permission for their orders to be handled away from regulated exchanges in particular, is covered in COBS {{cobsprov|11.2.25}} and {{cobsprov|11.2.26}}. As we shall see. | |||
{{prior consent and prior express consent}} | {{prior consent and prior express consent}} | ||
====Products which don't trade on a {{fcaprov|regulated market}} or {{fcaprov|MTF}}==== | ====Products which don't trade on a {{fcaprov|regulated market}} or {{fcaprov|MTF}}==== | ||
While at first blush it reads as though {{cobsprov|11.2.26}} should apply to all orders, even those which cannot be traded on a [[regulated market]] in any circumstances (otc swaps for example), the confines of common sense and logic have not entirely escaped the {{tag|European Commission}}. In its | While at first blush it reads as though {{cobsprov|11.2.26}} should apply to all orders, even those which cannot be traded on a [[regulated market]] in any circumstances (otc swaps for example), the confines of common sense and logic have not entirely escaped the {{tag|European Commission}}. In its “[http://ec.europa.eu/yqol/index.cfm?fuseaction=legislation.showIssue&issueId=69&browse=true&questionId=173 Questions on Single Market Legislation]” resource, it notes: | ||
{{quote|However, on a purposive reading of the express consent requirement, an investment firm does not have to obtain express consent from its clients where the relevant instruments are not admitted to trading on a [[regulated market]] or [[MTF]].}} | {{quote|However, on a purposive reading of the express consent requirement, an investment firm does not have to obtain express consent from its clients where the relevant instruments are not admitted to trading on a [[regulated market]] or [[MTF]].}} | ||
This view was confirmed in [[CESR]]'s | This view was confirmed in [[CESR]]'s “[[Media:CESR Best Execution QA 07_320.pdf|Best Execution under MiFID]]” document: | ||
{{quote|21.2 CESR considers that on a purposive reading of the | {{quote|21.2 CESR considers that on a purposive reading of the “express consent” requirement, an investment firm does not have to obtain express consent from its clients where the relevant instruments are not admitted to trading on a regulated market or MTF.}} “” | ||
====Products which trade {{tag|OTC}} - can the transaction a consent to execute off {{tag|regulated market}}?==== | ====Products which trade {{tag|OTC}} - can the transaction a consent to execute off {{tag|regulated market}}?==== | ||
In order to comply with this rule, the safest course is to ask clients for a generic permission to execute trades off {{fcaprov|regulated markets}} or {{fcaprov|MTFs}} across the board. Some clients might object, however, to such a wide-ranging permission. | In order to comply with this rule, the safest course is to ask clients for a generic permission to execute trades off {{fcaprov|regulated markets}} or {{fcaprov|MTFs}} across the board. Some clients might object, however, to such a wide-ranging permission. | ||
You can of course ask instead for consent | You can of course ask instead for consent “in respect of individual transactions” (per the wording of {{cobsprov|11.2.26}}). This might seem unfeasible, but consider that for many products that might oherwise be caught (especially OTC transactions) the very act of transacting in a certain way - if that way necessarily entails trading outside a {{fcaprov|regulated market}} or {{fcaprov|MTF}} - amounts to express consent to trade in that way. | ||
And that is actually a pretty fundamental get-out. | And that is actually a pretty fundamental get-out. | ||
There is an unspoken distrinction in the {{tag|COBS}} rules between: | There is an unspoken distrinction in the {{tag|COBS}} rules between: | ||
* | *“'''agency'''” or “'''quasi-agency'''” orders: orders whereby a broker receives instructions from client and then turns around and interacts with third party venues (including {{fcaprov|regulated market}}s, {{fcaprov|MTF}}s but also unregulated venues like systematic internalisers), without involvement of the client, to fill that order); and | ||
* | *“'''bilateral'''” transactions where client trades with the broker directly in a principal capacity and any transaction between the broker and the market is by way of {{tag|hedge}} and not fulfillment of the customer's order. These are things like OTC derivatives under an {{isdama}}; spot FX trades and so on. |