25 May 2022

ESMA: Other bodies and agencies Review of the MiFID II framework on best execution reports by investment firms

In the application of the MiFID II framework, ESMA has become aware, also through contacts with stakeholders, of potential issues related to these best execution reporting requirements. The issues are primarily related to reporting by venues and to a lesser extent to firms’ reports.

MiFID II requires execution venues and investment firms to publish periodic data on the quality of execution and has required ESMA to adopt technical standards in this area. Relevant technical standards are known as RTS 27 (applicable to execution venues) and RTS 28 (applicable to investment firms).

Additionally, Directive (EU) No. 2021/338 (“MiFID II Amending Directive”) suspends the application of the RTS 27 reporting requirements for two years and requires the European Commission (“Commission”) to comprehensively review the adequacy of the reporting requirements under Articles 27(3) and (6) of Directive (EU) No. 2014/65 (“MiFID II”) and submit a report to the European Parliament and the Council.
In this light, and in the context of ESMA’s mandate in accordance with Articles 1(5), 16a(1) and 29(2) of the ESMA founding regulation (Regulation (EU) No. 1095/2010), on 24 September 2021 ESMA published a Consultation Paper to seek stakeholders’ technical input on ESMA’s proposals for possible

improvements to the 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 consultation period closed on 23 December 2021. ESMA received 51 responses, 9 of which were confidential. The answers received are available on ESMA’s website unless respondents requested otherwise.

During the period in which ESMA’s consultation was open, the Commission published its legislative proposals for the review of the MiFID II/MiFIR framework. Those proposals include to delete both Article 27(3) (i.e., the Level 1 basis for the reporting obligation for venues) and Article 27(10)(a) MiFID II (i.e., the empowerment for ESMA to develop draft technical standards). In other words, the Commission’s proposed deletions aim at abolishing reporting requirements for venues (RTS 27). In this light, ESMA decided to put on hold any on-going work related to RTS 27 and, consistently, this Final Report does not deal with this topic but only with best execution reporting requirements for investment firms. ESMA might reconsider this decision, should the Commission’s proposal be amended as a result of negotiations at legislative level (so called Level 1) on the MiFID II/MiFIR Review.

ESMA sought the advice of the ESMA Securities and Markets Stakeholder Group (SMSG) established under Regulation (EU) No 1095/2010...

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