Best execution can also apply to the prices given to customers. The prices should be fair and it may be necessary to provide motivation as to how the prices were reached.
Systematic internalisers, and also firms regularly involved in OTC trading (“other liquidity providers”) matching client orders against an own book will need to supply statistics on how they performed their internalisation the previous quarter. The data is compiled into nine tables of information and should cover daily internalisation statistics per instrument. The information may be valuable for other investment firms when reviewing their best execution policies.
Internalisation or client facilitation can be done in a systematic or non-systematic fashion. Having an infrastructure in place to bring structure to the internalisation, including price requests that don’t reach a transaction, is beneficial to capture record-keeping data and to automate post trade transparency compliance. If a firm decides it want to register as being systematic, a pre-trade transparency module can be added to fully comply with the SI regime. A firm that crosses the levels for becoming an SI needs to comply with the SI regime within three months, so having the basic infrastructure allows an easy upgrade to scale up within the required time frame.
In a firm where Systematic Internalisation is part of the best execution policy, the SI solution will be an additional venue. The SOR will route orders to the SI if it is appropriate to do so from a best execution perspective.