Proposed Amendments to the EU Best Execution Reporting Regime under MiFID II

The European Securities and Markets Authority has launched a consultation on proposed amendments to the best execution reporting regime under the EU's Markets in Financial Instruments Directive. Responses to the consultation may be submitted by December 23, 2021. ESMA is expected to send its recommendations for amendments to the European Commission in H1 2022.

The MiFID II best execution requirements oblige investment firms to obtain the best possible result for their clients when executing client orders, and require execution venues and investment firms to make data relating to the quality of execution of transactions publicly available. The requirements in the MiFID II Directive are supplemented by Commission Delegated Regulation (EU) 2017/575 (RTS 27, applicable to execution venues) and Commission Delegated Regulation (EU) 2017/576 (RTS 28, applicable to investment firms). The EU's MiFID II "quick fix" directive suspends the RTS 27 reporting requirements until February 27, 2023 (the suspension will only take effect from February 28, 2022) as evidence shows that the reports are rarely read and their use to investors is questionable. The Commission is due to report on the adequacy of the best execution reporting regime by February 28, 2022.

ESMA's consultation concerns proposals to improve the best execution reporting requirements. However, ESMA states in its press release announcing this consultation that the outcome of the consultation will not result in immediate changes to the RTS as the amendments to the MiFID II Directive will need to made first. The proposals aim to streamline the reporting requirements and focus on ensuring that investors are provided with meaningful information that will be useful in informing their decision on execution venues.

The U.K. Financial Conduct Authority consulted earlier this year on removing some of the best execution reporting obligations under U.K. MiFID II (as inherited from the EU), including deleting the U.K. inherited versions of RTS 27 and RTS 28. The FCA is expected to publish its policy and amended rules before the end of 2021.

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