What does 'best execution' mean in the context of FCA regulations?

In the context of FCA regulations, 'best execution' refers to the requirement for firms to execute client orders on the most favorable terms possible. This principle is designed to ensure that clients receive the best possible outcome when their orders are executed, taking into consideration various factors such as price, costs, speed of execution, likelihood of execution, and settlement, among others. The FCA mandates that firms must have policies and procedures in place to achieve best execution, ensuring that client interests are prioritized and that clients are treated fairly.

The emphasis on executing client orders on favorable terms encompasses a broader perspective than simply focusing on minimal costs or speed. Best execution obligates firms to evaluate multiple execution venues, assess their effectiveness, and provide clients with the optimal conditions for their transactions. This holistic approach is pivotal in maintaining trust and transparency in the client-firm relationship and upholding the integrity of the financial markets.

Understanding this principle is essential as it underlines the commitment of financial entities to act in their clients' best interests, ultimately fostering competition and efficiency within the market.