FCA: Best Execution in UK Listed Cash Equities

Best execution is fundamental to investor protection, maintaining trust in UK markets and attracting investment and trading activity. Banks have a key role in delivering best execution for clients who rely on them to act in their best interests.

We last carried out a thematic review (TR14/13) of wholesale banks’ best execution practices in 2014. That review identified a risk that best execution was not being consistently delivered to all clients.Since then, market practices in the equities market have continued to evolve. In particular, firms increasingly rely on execution algorithms and smart order routing technology. Market dynamics have also shifted, with liquidity moving towards bilateral trading, including systematic internalisers (SIs).

There has also been a move to increased trading during closing auctions on exchanges.In the context of regulation, the Markets in Financial Instruments Directive (MiFID II), which came into force in 2018, has extended the best execution rules and regulatory framework for SIs in equities.

This review looked at 8 wholesale banks active in UK listed cash equities dealing and execution.This sample provided broad coverage across the market and included large and mid-size banks.MiFID transaction reports submitted to us show the UK equities market (excluding over-the-counter) in Q3 2025 had notional volumes of around £1.3 trillion and 185m transactions.

The banks in our sample accounted for around 38% of the notional volumes and 67m transactions in this market.Our assessment considered:

1. Whether banks had suitably scoped their best execution obligations.
2. The strength of banks’ governance and oversight.
3. The robustness of banks’ best execution monitoring and management information (MI).
4. Whether banks are identifying and managing conflicts of interest appropriately when internalising client orders.

We assessed these areas against our:

• Best execution rules set out in COBS 11.2A.
• Conflict-of-interest rules set out in SYSC 10.

Our starting point was to analyse information in banks’ transaction reports and their own data to understand arrangements and outcomes.We followed this up with meetings to explore individual banks’ approaches. We also spoke with buy-side representatives and trade associations.

We were encouraged to find stronger practices compared to our 2014 thematic review.Of the areas we assessed, banks generally had strong practices in assessing the scope of best execution. We also found no evidence that internalisation was damaging client outcomes.

Banks’ monitoring of best execution was able to identify good and poor outcomes. We also saw evidence of banks taking action to address examples of poor outcomes. In contrast, the quality of management information (MI) to support senior management oversight was variable. We found some MI was comprehensive, but we also found examples of it being either too high level or overly complex.

While we observed some good practices in governance and oversight, this was also where we found the least progress made since the 2014 review. Specifically, we found the need for improvement in the challenge from the second line of defence. The banks who were the strongest in this area had empowered their compliance functions, supporting them with the right data and tools.

We have given individual feedback to the banks in our sample, highlighting where we have identified good practice and areas for improvement. We’ve highlighted some of those examples in this report for firms to consider. We will continue discussions with wholesale banks on their approaches to best execution.

During our review, we received feedback from firms on the rules and guidance covering the scope of best execution and the requirements to get express consent, outlined in COBS 11.2A.24R. We will consider this feedback in any future review of our rules.

Furthermore, in July 2025, we published CP25/20 seeking views on market effectiveness in light of recent developments in market structure.We announced changes to the systematic internaliser (SI) regime for bonds and derivatives, structured finance products and emissions allowances in PS25/17.

We continue to consider feedback and conduct further analysis to bolster our view on equity markets. This analysis considers the structure of trading and the liquidity provided by SIs, utilising MiFID II transaction data and order book information. In parallel, we’re also exploring execution outcomes across different venues.If we consider that proposing rule changes is appropriate, we will consult on those changes in the first half of 2026.

Source: FCA