In the world of asset management, everyone knows about the European Securities and Markets Authority’s definition of “best execution.”
It means the obligation of asset managers to continuously strive to get the best overall results for clients and clearly disclose their order execution policies.
For a long time this was mostly related to the equity markets, but that changed in 2025.
Wider scope beyond equities
This year, Esma updated the rules, and now best execution is not just about stocks anymore.
With new standards, wealth managers and advisers are expected to deliver best execution across a whole range of assets — from foreign exchange and commodities to cryptocurrencies.
Legally, best execution has always covered every financial instrument as Mifid II’s duty has applied to all assets, but Esma’s 2025 RTS takes this further, by clarifying which instruments and how.
Put simply, the main difference now is that regulators raise the bar of expectations from the investment firms, and advisers building multi-asset portfolios face a bigger responsibility.
Speaking honestly, this also eliminates the possibility of these rules being neglected, as they were before by many managers.
Now they have to be able to show, with evidence, that clients are getting fair execution, no matter what they are invested in.
Although the UK is outside the EU, UK firms serving EU clients still need to understand and comply with Esma standards.
Also, the Financial Conduct Authority has made best execution a supervisory priority, so Esma’s move provides a signal of where UK oversight may tighten next.
Why other markets are harder to measure
At first glance, people far from trading might wonder: what is the problem?
If equities are already regulated, why not apply the same rules to other assets?
But the issue is that measuring execution quality in non-equity markets is not that simple, because each asset class comes with its own challenges, like different liquidity levels and costs.
Forex and commodities, for example, are often traded in decentralised or over-the-counter markets, where there is no single benchmark price.
Execution quality in these markets depends on many factors, like liquidity, how likely the trade will happen and how much the trade might affect the market.
As for the crypto market, it is also a whole different story.
One big challenge is that prices can change very quickly, every millisecond, and trading happens around the clock.
On top of that, some platforms may have outages or less available liquidity, which can cause slippage — meaning the price you get when the trade is executed might be different from what was expected.
In the end, the portfolio performance is highly dependent on external factors like the speed of a trade or the health of the venue, and not your capabilities as an asset manager.
Speaking of costs, which is another important factor for performance, things get pretty opaque outside the stock market.
With equities, it is usually easier to see what you are paying, but in places like commodities, some costs — like spreads, mark-ups and clearing fees — are often included quietly within the trade prices, complicating the total consideration.
Because of that, it is tough for both firms and clients to really know the full cost of a trade.
Some progress and gaps
The good news is that regulators are stepping up to make asset managers’ lives easier by improving the data that can be used as a reference.
For instance, Esma has chosen Ediphy to be the EU’s first consolidated tape provider, which gives firms a benchmark to compare the trades.
Other assets benchmarks are also developing, but there are still gaps, especially when it comes to forex and crypto, where official consolidated tapes do not exist and coverage inside and outside the European venues remains patchy.
Technology progress is helping too.
More and more firms are using tools like multi-asset transaction cost analysis and venue aggregation across fixed income, forex and digital assets.
For the big players this is a true game-changer, as it makes it easier to connect the dots across different markets and have a clear execution plan and explain it better to the client.
However, for smaller firms, having instruments that keep an eye on markets 24/7 can be tough and sometimes just not affordable.
What it means for advisers
For advisers, this regulatory update should be perceived as a tool to increase client trust.
Do not take it as a new obstacle, though it creates some difficulties indeed, but consider this as a chance to be more client-oriented.
Poor execution can eat into returns in ways that customers notice — that is why advisers need to rethink the best execution update as part of the client proposition.
If a portfolio strategy depends on buying currencies, advisers should assess whether they can demonstrate high-quality execution in that market.
Similarly, if clients are exposed to digital assets, advisers should question whether they can demonstrate how quickly they monitor venues.
So, when it comes to reporting in the end, firms can explain clearly how orders are handled across asset classes.
Those ones will stand out from their peers and will gain more of a market share in the future.
Eugenia Mykuliak is founder and executive director of B2PRIME Group