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COBS 11 – Dealing and Managing Client Orders
1. Chapter Summary
COBS 11 establishes rules for firms when handling client orders, focusing on best execution, order recording, and personal account dealing. It ensures clients’ interests are prioritised during trade execution and that firms maintain transparency and control over trading activities. These standards are vital for market integrity, investor protection, and regulatory oversight.
2. Applicability
Applies to all firms conducting designated investment business, including executing client orders, managing investments, or operating trading venues. This includes MiFID and non-MiFID firms, but some provisions differ—for instance, UCITS or AIFM management companies have tailored best execution obligations. There are carve-outs for non-financial spread bets, where best execution isn’t mandatory.
3. Key Rules and Their Meaning
- COBS 11.2.1R – Best execution (non-MiFID) Firms must take “all reasonable steps” to achieve the best possible outcome for clients when executing orders. This means considering price, cost, speed, and likelihood of execution and applying consistent policies in practice.
- COBS 11.2A.1R – Best execution (MiFID) MiFID firms must have systems to obtain the “best possible result” across factors like price, cost, speed, and settlement. This aligns with EU standards and ensures comprehensive trade handling measures.
- COBS 11.4.1R – Client limit orders Firms are required to make public unexecuted client limit orders unless exceptions apply—such as trading via a venue that automatically publishes such orders. This enhances transparency in limit order management.
- COBS 11.5A.1R – Order recording Firms must keep detailed records of client orders and related decisions, including time, nature of the order, and transactions executed. These records support accountability and regulatory supervision.
- COBS 11.7A.1R – Personal account dealing (MiFID) Firms must enforce policies controlling personal trading by staff holding inside information or client influence roles. Proper approval processes and monitoring prevent conflicts between personal and client interests.
4. Interpretation Notes / FCA Expectations
- Firms should implement execution policies reflecting client type and market, and document rationale for venue selection.
- Best execution isn’t just about price; holistic factors must be weighed fairly and consistently.
- Limit order rules don’t apply if orders are sent to venues that automatically publish them.
- For personal trading, FCA expects pre-approval, blackout periods, and proactive monitoring by senior staff.
5. Practical Considerations for Firms
- Establish and document best execution policies, regularly reviewed and benchmarked.
- Use surveillance systems to track order execution metrics and identify deviations.
- Transparently publish unexecuted limit orders or send them to compliant venues.
- Maintain complete order logs in accordance with record-keeping standards.
- Implement a personal account dealing policy, including training, pre-approval controls, and ongoing monitoring.
- Conduct internal audits to test compliance with trading rules and identify gaps.
6. Related Handbook References
- COBS 9A/10A – Core suitability and appropriateness provisions
- PRIN 2A – Underlying principles of fair treatment and governance
- SYSC – Systems and Controls over trading and personal dealing
- MIFIDPRU – Prudential rules including best execution frameworks
- COBS 11A – Reporting obligations tied to underwriting and placing services
7. Regulatory Focus / Enforcement Risk
- The FCA closely monitors best execution compliance, particularly after high-profile enforcement actions where firms failed to meet policy standards.
- Transparency shortcomings around limit orders have also resulted in regulatory sanctions.
- Inadequate governance or oversight of staff trading—especially personal dealing—remains a significant regulatory concern.