Back from a couple of weeks in Mexico where it seemed the whole world was going steadily insane (or maybe that was just the tequila). Anyways, it was reassuring to start the week with another “wow is that what they really meant?” moment whilst gorging on the never-ending box set known as MiFID 2. This time it’s about the obligations on brokers to report annually their top venues of execution. A sensible(ish) pointer towards disclosure and best execution, but there’s a catch. The wording means that brokers will need to disclose if they outsource their order flow to one of the big boys as this could easily be classified by the lawyers as an “execution venue” just as much as BATS, Turquoise, LSE and others are. This will expose to buy-side customers how often this happens, but it will also leave them no better off in terms of understanding where they actually traded.

The much bigger problem, though, is that without understanding the original trading objective (speed, price, discretion, etc) any concept of best execution is meaningless. This was exactly the case on Brexit Friday as punters reversed their previous bets. We saw a 6-fold increase in equities and derivatives volumes that day where the key objective was “just get the thing done”. VWAP, TWAP, etc suddenly became irrelevant in the scramble to get to the other side.

I am increasingly being asked these days whether the past decade of regulatory reform has improved outcomes for end investors. I leave you to figure out my answer…