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Best execution: Difference between revisions
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====The four-fold test==== | ====The four-fold test==== | ||
The in its [[Media:letter-cesr-best-execution_en.pdf|Opinion ESC-07-2007]] the {{tag|European Commission}} set out a list of the four-fold cumulative test to help determine whether a {{fcaprov|client}} is legitimately relying on the {{fcaprov|firm}}: | The in its [[Media:letter-cesr-best-execution_en.pdf|Opinion ESC-07-2007]] of 19 March 2007 the {{tag|European Commission}} set out a list of the four-fold cumulative test to help determine whether a {{fcaprov|client}} is legitimately relying on the {{fcaprov|firm}}: | ||
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# '''Initiation''': Which party initiates the transaction; <br> | # '''Initiation''': Which party initiates the transaction; <br> | ||
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Quoth the {{tag|European Commission}}: | |||
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The application or otherwise of best execution will depend on whether the execution of the client's order can be seen as truly done ''on behalf of'' the client. This is a question of fact in each case which ultimately depends on '''whether the client legitimately relies on the firm to protect his or her interests in relation to the pricing and other elements of the transaction - such as speed or likelihood of execution and settlement - that may be affected by the choices made by the firm when executing the order'''. The following considerations, taken together, will help to determine the answer to this question: | The application or otherwise of best execution will depend on whether the execution of the client's order can be seen as truly done ''on behalf of'' the client. This is a question of fact in each case which ultimately depends on '''whether the client legitimately relies on the firm to protect his or her interests in relation to the pricing and other elements of the transaction - such as speed or likelihood of execution and settlement - that may be affected by the choices made by the firm when executing the order'''. The following considerations, taken together, will help to determine the answer to this question: | ||
=====Initiation===== | =====Initiation===== | ||
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=====Available information===== | =====Available information===== | ||
The information provided by the {{fcaprov|firm}} about its services and the terms of any agreement between the client and the investment firm will also be relevant, but not determinative of the question. '''The use of standard term agreements to characterise commercial relationships otherwise than in accordance with economic reality should be avoided'''. | The information provided by the {{fcaprov|firm}} about its services and the terms of any agreement between the client and the investment firm will also be relevant, but not determinative of the question. '''The use of standard term agreements to characterise commercial relationships otherwise than in accordance with economic reality should be avoided'''. | ||
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===See Also=== | ===See Also=== | ||