Response to CESR public consultation on Best Execution under MiFID - On the Importance of Transaction Cost Analysis

In response to the CESR's public consultation on best execution under MiFID, EDHEC strongly defend 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 have 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.