Chip Lowry Head of Global Link Europe at State Street
Chip Lowry Head of Global Link Europe at State Street

What is Best Execution in the Foreign Exchange market?

There is some confusion surrounding the idea of Best Execution in the FX market. Chip Lowry shows how tricky it is to define and the difficulty to empirically prove it.

Best execution is a concept dear to the heart of every fiduciary and investor. Rooted in historic traditions of common law and the theory of agency, the concept is routinely cited as an aspiration beyond reproach – much like truth, peace or justice. Given its universality, it is no small irony that the concept has always – and perhaps always will – defy a universally accepted definition.Little wonder that there is much confusion surrounding the idea, particularly in the foreign exchange market. And this confusion may soon be compounded by some industry efforts designed to guarantee best execution, even in the face of a total absence of consensus on what the term implies. These well-intentioned efforts may actually result in business practices that are clearly not best execution, in any sense of the term.Defining Best Execution Attempts to define best execution have often run aground on a central confusion of best execution with best price. In fact,...continued

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