EDHEC replies to CESR's consultation on best execution under MiFID

As part of a research programme focusing on 'Best Execution and Operations Performance', EDHEC has contributed to the review of existing approaches to measuring execution quality and has introduced an innovative framework for analyzing transaction costs and measuring execution performance: EBEX.

In response to the CESR's public consultation on best execution under MiFID, EDHEC strongly defends the idea that the analysis of the total net proceeds of financial transactions represents the most important factor for assessing execution quality.

However, this analysis also represents the most significant conceptual and technical challenge the industry will face in order to consistently monitor execution quality, and therefore allow best execution to become a tangible and measurable objective for investment firms.

Since the best execution obligation is a cornerstone within the arsenal of protective provisions the Directive has put in place so as to ensure a possible fragmentation of market will not be detrimental to investors, it is important that the regulator ensure the stated obligation can actually be monitored independently.

In order to contribute to the public debate, EDHEC has put together a detailed analysis of the various aspects of Transaction Cost Analysis, a review of the pertinence and biases exhibited by current practices and an introduction to EDHEC's innovative framework which was published in the most recent issue of the Journal of Asset Management.

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