MAS outlines Best Execution proposals for finance cos, including FX brokers

Maria Nikolova

The Monetary Authority of Singapore is proposing to formalise expectations for finance companies, including Forex brokers, to have in place policies and procedures to place and/or execute customers’ orders on the best available terms.

The Monetary Authority of Singapore has earlier today published a consultation paper on new “best execution” requirements that will affect Forex brokers too. In summary, the regulator aims to formalize expectations for holders of a capital markets services licence (CMS licensees), banks, merchant banks and finance companies to have in place policies and procedures to place and/or execute customers’ orders on the best available terms. The goal is to support fair outcomes for customers. This is in line with MAS’ earlier proposal for a market operator to have in place measures to facilitate its members’ execution of customers’ orders in the customers’ interests, and to ensure that its handling and execution of bids and offers is conducted on a fair and objective basis.

The new rules will supplement existing conduct requirements on handling and execution of customers’ orders and enhance investor protection. MAS proposes to require financial institutions to have in place measures to (a) consistently deliver Best Execution when placing and/or executing customers’ orders and (b) handle comparable customers’ orders in accordance with their time of receipt.

The proposals in this consultation paper are intended to be applied to CMS licensees, banks, merchant banks and finance companies that conduct the regulated activities of dealing in securities, trading in futures contracts, leveraged foreign exchange trading, fund management and/or real estate investment trust management under the SFA.

To achieve the best available terms for customers’ orders, a company should consider different factors such as price, costs, speed, likelihood of execution and settlement, size and nature of the customer’s order, where appropriate. Various factors may have different “weight” in determining what the best available terms are. For instance, the impact to the market which in turn affects the price at which a customer’s order may be executed is more likely to be an important consideration in achieving Best Execution for a large order from an institutional customer, as compared to a retail customer’s order.

The Best Execution procedures should apply to all customers’ orders, regardless of the capacity which a Capital Markets Intermediary is acting in (whether as an agent or principal).

Also, in order to boost transparency and facilitate customers in making informed decisions on trading services, a Capital Markets Intermediary should provide adequate disclosure to customers on its Best Execution policy.

Written comments are expected by December 18, 2017 via email to [email protected]

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