ESMA publishes paper setting out plans to change MiFID II reporting requirements

The European Security and Markets Authority (ESMA) has invited firms to comment on its consultation paper seeking to make reporting requirements changes under MiFID II.

According to The Trade News, ESMA has labelled the reporting requirements of the regulation as ‘burdensome’, and the alterations suggested by the regulator focus on the potential streamlining of the range of information required to be reported under MiFID II’s RTS 27 and RTS 28, which require execution venues and investment firms to publish periodic data on the quality of execution respectively.

Among some of the key proposed changes to reporting for revenues in the cutting of best execution indicators down to seven specific areas. These involve the complete monetary value of all transactions per type of financial instrument executed by a venue, median monetary transaction value per type of financial instrument, fees applied to users for a median transaction, bid-offer spread related to a median transaction, speed of execution, the total number of market makers designation to a venue per instrument and acess to further information on costs.

ESMA – aiming to create a more streamlined approach to the current RTS 27 regime that could enable reduced reporting efforts for venues – has suggested changing the necessary granularity of information required to alternatively focus on reporting per type of financial instrument over a quarterly period. The authority has also raised in the paper the idea of aggregating RTS 27 reports within asset classes.

The authority said that the reporting on these features would provide market participants with a more ‘focused’ and ‘swift’ overview of execution quality achieved on venues.

ESMA stated in the paper, “The objectives behind the best execution reporting obligations by firms and execution venues continue to be justified. However, the existing regime has proven burdensome and not entirely able to achieve the intended objectives,” said ESMA in its paper.

“ESMA proposes to work in the direction to develop a streamlined, less detailed and more user-friendly RTS 27 reporting framework which aims to ensure that venues publish meaningful information on their achieved execution quality, which assist the public and market participants in choosing the best execution venue for their order executions.”

Furthermore, the consultation paper has raised the potential for changing the scope of RTS 27 in terms of which execution venues fall under it, restricting market-makers from needing to adhere to the new reporting regime to create a closer link with the transparency requirements under MiFID II.

The regulator has also established plans to amend the way investment companies reporting execution quality. Currently, under RTS 28, companies are obliged to publish an annual report on quality achieved in execution of client orders on venues, SIs and other liquidity providers.

ESMA has additionally suggested amendments to which requirements should be included as part of reporting under RTS 28 to make the information more ‘meaningful’. These involve removing the need to include the percentage of orders which were passive and aggressive when drafting lists of top five performers and adding the requirement to explain why companies have not been able to provide data on required parameters.

ESMA added, “The proposals in this paper aim at standardising and making reporting obligations, to the extent possible, less burdensome. Therefore, the proposed more focused requirements for RTS 27 and 28 reports should enable venues and firms to provide them at lower costs than under the current reporting framework.”

Comments will be accepted for the consultation paper until 23 December this year.

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