MiFID og Best Execution

Tine Vestergren Jensen

Student thesis: Master thesis


MIFID was implemented in the Danish legislation in November 2007 and has created some new requirements for investment managers operating in Denmark. Among the new requirements are increased information and reporting to be provided to customers, reporting towards the Danish FSA, publication requirements for all trades in listed securities traded outside regulated markets etc. Another one of these requirements, which has been treated in depth in this assignment, is the requirement of ensuring best execution. Best execution is not a new requirement in Danish legislation but has been clarified somewhat through MIFID and now sets more specific requirements to the Danish investment managers. This requirement can be validated through economic theories and differences in how markets operate causing pricing differences depending on where the order is executed. In the economic part of the assignment it is shown how different pricing rules and market conditions such as market participants and liquidity can affect the pricing of the same share or bond. However, due to other changes that MIFID brings it cannot be concluded that MIFID and the implementation of the best execution requirement actually increases the investor protection. This is caused by the fact that even though there is a requirement of best execution, it can be very difficult for investment managers to ensure this in certain situations. Examples of such situations are illustrated in the thesis and shows that some of the problems have not been improved by MIFID. The implementation of MIFID has created reporting and publication requirements, which improves the visibility in the market and thereby helps investment managers to ensure and document best execution. However, the requirements are contradicted by limitations regarding reporting and publication of large orders, where the publication can be made and the fact that a new type of markets called multilateral trading facilities are introduced. Hereby, competition among marketplaces will increase, but the visibility is believed to decrease. All in all, MIFID implements a number of new requirements to ensure better protection of investors in EU, however as it appears from the following this goal cannot be viewed as completely fulfilled.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2008
Number of pages87