ESMA publishes statement on reporting requirements under RTS 28 of MiFID II
Key takeaways
- As the MiFID II review removes the obligation to publish reports on best execution, ESMA expects National Competent Authorities (NCAs) not to prioritise supervisory actions towards investments firms on RTS 28 reports.
- Best execution remains important: investment firms are required to strictly adhere to best execution requirements and NCAs are expected to supervise their compliance.
- Read the insights from our European Financial Services Regulatory team below how this statement affects jurisdictions across Europe.
ESMA’s statement
On 13 February 2024, the European Securities and Markets Authority (ESMA) issued a public statement on the obligation by investment firms to publish some reports on best execution in accordance with the Markets in Financial Instruments Directive (MiFID II). The statement is issued in addition to ESMA’s public statement of 14 December on the deprioritisation of supervisory actions on the obligation to publish RTS 27 reports after 28 February 2023.
Article 27(6) MiFID II requires investment firms to publish annually information on the identity of execution venues and on the quality of execution. Commission Delegated Regulation (EU) 2017/576 (RTS 28) sets out regulatory technical standards which further specify the content and format of this information in the annual reports (RTS 28 reports).
The statement is adopted in the context of the political agreement on the MiFID II/MiFIR review between the Council of the European Union and the European Parliament on 29 June 2023. The European Parliament adopted the agreed texts on 16 February 2024. The adopted text of the Directive amending MiFID II includes the deletion of Article 27(6) MiFID II and therefore the obligation to publish RTS 28 reports. According to Recital 8 of that Directive, those reports are hardly read and do not enable meaningful comparisons.
However, as Member States will have 18 months to transpose the Directive amending MiFID II after its date of entry into force, investment firms may still have to publish RTS 28 reports in 2024 until the date of transposition of the Directive in the respective Member State(s).
Therefore, ESMA seeks to promote coordinated action by NCAs by stating that it expects NCAs not to prioritise supervisory actions towards investment firms relating to the obligation to publish the RTS 28 reports. Stressing that best execution remains important under the amended MiFID II rules, ESMA mentions that investment firms are required to strictly adhere to best execution requirements and NCAs are expected to supervise their compliance.
While ESMA's signal regarding the intended early relaxation of the best execution related reporting and, in particular, publication requirements is to be welcomed, it should be viewed with cautiousness from a German perspective. Completely waiving the existing publication obligations requires action by the legislator, as they are implemented in Section 82 (9) of the German Securities Trading Act (WpHG) and generally aim at customer protection. A full waiver prior to a political decision may, therefore, exceed the regulator’s competencies.
Elena Vadolas, Counsel, Frankfurt
On 31 Marc 2020 ESMA issued a Public Statement to clarify issues regarding the publication by execution venues and firms of the general best execution reports required under RTS 27 and 28 of MiFID II, in light of the COVID-19 pandemic. ESMA encouraged national competent authorities not to prioritise supervisory action against execution venues and firms in respect of the deadlines of the general best execution reports. In the Netherlands, the AFM already indicated on 1 April 2020 that it would support this guidance of ESMA. In light of the current statement of ESMA not to prioritise supervisory actions towards investment firms relating to the periodic reporting obligation to publish the RTS 28 reports, we expect the AFM to confirm its support shortly.
Martijn Boeve, Legal Director, Amsterdam
The UK removed the reporting obligations in RTS 27 and RTS 28 with effect from 1 December 2021, so this change has already happened in the UK.
The FCA carried out policy work and discussions with market participants and found:
- Intended audiences for the reports, including retail and wholesale market participants, do not view the reports. For example, a small sample of firms reveals that, on average, there were fewer than 10 downloads of the data per month or unique visitors to their RTS 27 or RTS 28 sites.
- A range of firms stated that they have never received enquiries from their clients or from other market participants about the data that they publish.
- In most cases, market participants have found the RTS 27 reports overly complex and requiring significant analytical and IT resources to extract from different venues and to interpret; the data is out of date – 3 to 6 months old at the time of publication.
- Outputs from RTS 28 reports are equally unhelpful for scrutinising best execution and deciding on which brokers to use. Wholesale market clients are interested in information that is specific to the type and range of business they will be doing with a brokerage firm. Less interesting for them is generalised information which aggregates across business done with a disparate range of clients.
Puesan Lam, Legal Director, London
