IFLR Quotes Ezra Zahabi on Systematic Internalizers Preferences for Buyside Firms

Ezra Zahabi, counsel in Akin Gump’s financial regulatory practice, has been quoted in the International Financial Law Review article “Mifid II: buyside weighs SI preference with best execution.” The article reports that buyside firms are considering whether they can deal exclusively with systematic internalizers (SIs) for off-venue trading, while honoring their best execution obligations under the new Markets in Financial Instruments Directive (Mifid) II.

The new directive, as the article notes, introduces many new types of trading firms to SIs. When executing an off-venue trade, it says that if a buyside firm chooses to execute with an SI, the trade reporting obligation falls to the SI, not the buyside firm. The new SI regime does not take effect until September, but many banks and brokers are opting in early to provide that reporting service to their clients.

While a Mifid firm has to consider the specified execution factors, including price, speed of execution and liquidity, when determining best execution, Zahabi said, “it cannot take into consideration whether a counterparty will undertake transaction reporting for it. In the absence of a material price difference, it would probably be quite difficult to challenge a best execution decision, but firms’ policies and practices should be clear on the proper basis of assessing best execution.”