Inappropriate order handling

Definition

failure to deliver best execution to clients or deliberate and / or negligent behaviour resulting in poor client outcomes when executing their orders

Surveillance

Effective implementation of surveillance alerts for inappropriate order handling requires capturing the following trade data:

• trade and position

• client orders including relevant specifications and execution details

• market prices and volumes

Risk taxonomy

Derived risks

• front running

• misleading mark-up

• partial-fills

• stop loss jamming

• inappropriate order fill rates

Regulatory source

FCA FX market wide remediation programme identified a number of risks related to unacceptable behaviours involving client orders.

General best execution obligations are outlined by various regulators around the globe. MiFID II best execution, Article 27 - Obligation to execute orders on terms most favourable to the client, provides an example of regulatory expectations around handling client orders.