France's AMF has published a guide to its opinions about 'best execution' and 'best selection' under the Markets in Financial Instruments Directive.

In Position-Recommendation 2014-07, the Autorité des Marchés Financiers explains how it expects intermediaries to apply the rules. After making enquries, it believes that people are interpreting and applying rules inconsistently in areas such as content policy, 'review of execution' policy, the relationship between execution policy and selection policy, and information about clients. The guide does not go into all the rules applicable to best execution/best selection, but deals with policy-related issues that the regulator has identified. It sprang from detailed talks with the representatives of retail investors, and a public consultation. It deals with:

• how to prepare an execution policy, with a suggested non-exhaustive list of qualitative factors that that policy may take into account (such as a venue’s use of a central counterparty and 'transparency' in the price formation process);
• how to monitoring the effectiveness of order execution arrangements that a service provider has put in place and how to review the execution policy. In addition to the annual review, the guide is at pains to state that some events may affect the ability of the intermediary to obtain the best result and could thus necessitate a further review of the execution policy;
• how to prepare the 'best selection' policy by intermediaries that send orders to third parties for execution, and the relationship between this policy and the execution policies of selected entities;
• how to monitor and review the selection policy;
• the relationship between the 'best execution obligation' and obligations that relate to inducements and the identification and management of conflicts of interest; and
• the need to provide clients with clear, accurate and non-misleading information.

These provisions are to apply immediately, with the exception of those to do with reviewing best execution and best selection policies, which are to be applied in the next round of annual policy reviews.