Ask a compliance officer what their execution policy covers and they'll hand you a 40-page document that lists every venue, quotes ASIC Market Integrity Rules, and promptly puts you to sleep. Ask a trading desk head the same question and you'll get a grimace. The gap between those two answers is exactly where institutional algos go wrong — and where real execution quality is won or lost.

The honest answer is that constructing a genuine execution policy for institutional algo orders on ASX is significantly harder than most firms admit. You're not just satisfying ASIC's best execution obligation under Rule 3.1 of the ASIC Market Integrity Rules (ASX Markets). You're building a living framework that governs how your algorithms behave across fragmented liquidity, varying market conditions, and conflicting client objectives — all while the ASX Operating Rules quietly hold you accountable for every order you send.

CONCEPTBest execution is a outcome obligation, not a documentation exercise — your policy must describe how you actually achieve it, not just that you intend to.
WARNINGA policy that lists VWAP and TWAP algos without defining when each is appropriate gives ASIC nothing to audit — and gives your desk nothing to rely on.
KEY IDEAExecution quality factors — price, cost, speed, likelihood of execution, and order size — must be weighted explicitly for each client mandate type, not applied uniformly.

Think of it like a restaurant kitchen. Having expensive knives doesn't mean the food is good. What matters is the mise en place — who uses which knife, for which dish, under which conditions, and who checks the outcome. An execution policy is your kitchen's mise en place. Without it, every chef improvises, and the results are inconsistent even when the ingredients are identical.

Execution Factor Weighting by Mandate TypePriceCostSpeedPriceCostSpeedPriceCostSpeedPassive FundHedge FundSuperannuationHigh weightMedium weightLower weight

The chart above illustrates a key structural truth: the same three execution factors — price, cost, and speed — carry completely different weights depending on who you're trading for. A superannuation fund moving a $50 million block in a mid-cap ASX stock cares deeply about market impact. A hedge fund executing a pairs trade cares about speed. Treating them identically isn't just sloppy — it's a breach of your best execution obligation in substance, even if not in letter.

So what does a robust policy actually contain? At minimum, it defines your execution factor hierarchy per client segment, documents your algo selection logic (and who owns that decision), sets explicit criteria for when a human must override the algo, and establishes a post-trade review cadence with measurable benchmarks. The FCA's best execution guidance — though British in origin — offers genuinely useful structural thinking that translates well to the Australian context, particularly around demonstrating that your process, not just your outcome, was sound. For foundational definitions, resources like Investopedia's best execution overview and the Wikipedia entry on algorithmic trading help ground the concepts, while Investopedia's market impact explainer is essential reading for anyone sizing algo schedules against ASX liquidity profiles.

Your execution policy isn't finished when compliance signs it off — it's finished when your trading desk would actually reach for it during a difficult order.

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