The European Securities and Markets Authority (ESMA) has published its Final Report on the review of the MiFID II framework on best execution reports by investment firms.
MiFID II requires execution venues and investment firms to publish periodic data on the quality of execution and ESMA has adopted the regulatory technical standards RTS 27 (as applicable to execution venues) and RTS 28 (as applicable to investment firms) in this regard.
However, ESMA has become aware through contacts with stakeholders of potential issues relating to the best execution reporting requirements in respect of reporting by venues and, to a lesser extent, to investment firms’ reports.
ESMA published a Consultation Paper on 24 September 2021 to seek stakeholders’ technical input on ESMA’s proposals for possible improvements to the best execution regime which could be adopted in the future to ensure an effective and consistent level of regulation and supervision and enhance investor protection in this area.
The Final Report focuses on the best execution reporting requirements for investment firms and contains proposals through which best execution reports by investment firms could be improved that include:
- enhancing the RTS 28 reports’ quality of information (inter alia, by proposing to delete a specific reporting obligation for firms on the features of executed orders which has not proven effective under the current reporting framework); and
- facilitating the use of RTS 28 reports (e.g. via the suggestion that firms are required to publish the reports’ quantitative information in the simple CSV format to facilitate end-users’ access and comparison of this data).
Certain proposals in the Final Report concern potential changes to Article 27(6) of MiFID II. As a consequence, subsequent potential changes to RTS 28 (a Level 2 legislation) could only be considered against any future changes to MiFID II itself.