Financial Investment Services and Capital Markets Act revised in 2013(hereinafter referred to as "the Act") introduced the Alternative Trading System(ATS), which led to many institutional changes. Especially, the Act imposed the duty of best execution upon financial investment entities, that is investment trader or investment broker.
Since the duty of best execution is abstractly defined and provided, opinions in related business world are divided into in terms of how financial investment entities shall perform the duty of best execution in business environment. Therefore, this study places major emphasis on practical interpretation on provisions related to the duty of best execution in the Act.
The concept of the duty of best execution is likely to vary as market environment is changed. It is not easy to specify and enact details of the duty of best execution in the form of a provision. So concentrating on various executive process of the duty of best execution, the Act provides procedures of performing the duty of best execution. The duty of best execution in §68 of the Act means differentiated order execution corresponding to various needs of investors, and this definition in § 68 of the Act is in accordance with the concept of best execution in economics. On the other hand, as the applicable scope of this duty is very limited or narrow, it is necessary greatly to expand applicable scope in order to accomplish the purpose of the Act.
The duty of best execution can be explained in a concrete form as follows: the duty to draw up standards of best execution, the duty to disclose standards of best execution, the duty to execute given orders in accordance with standards of best execution, the duty to give manual for standards of best execution in advance, the duty to give report on order execution in accordance with standards of best execution.
If financial investment entities fail in their duty of best execution, administrative penalties or civil responsibilities are imposed on them. It is necessary to introduce the administrative levy system against financial investment entities and class action for protecting investors.
It is necessary to essentially review ATS, and then to set up an independent institution for market oversight to secure fairness of the market. And it is also necessary to extend and strengthen supervision system of self regulatory organization for inter-market competition and protection of investors.