RTS 27, the regulatory technical standard effecting best execution within Mifid legislation, has come fully into effect, mandating reporting standards that will ultimately benefit asset managers – according to the view of Vikas Srivastava, chief revenue officer at Integral.
“For many investment firms, RTS 27, in which venues including MTFs, SIs, liquidity providers, and market makers, must publish nine tables of granular data points related to their quality of execution on a quarterly basis, is proving to be a huge headache. Collecting complex data on this large a scale and on a granular level is a complicated effort for most investment firms,” Srivastava said.
“Although a challenging obligation to fulfil, once the regulatory requirements are met, they will prove to be an enormous benefit to all types of market participants. The increase in transparency surrounding execution data and policies will give investment firms deep insight into the execution quality achieved and delivered to the end investors. This insight will allow market participants to continuously improve on execution and confidently demonstrate that they are trading with the best interests of their customers in mind.”
What RTS 27 does is effectively force the relevant market participants to provide reports that can show that they are following best execution requirements in the law. The principle of best execution is not a new phenomenon solely associated with Mifid II. For example, it was a requirement addressed back in 2010 by the then Financial Services Authority (now the Financial Conduct Authority), in a consultation paper targeting platforms and platform users – including IFAs – who were seeking to respond to the RDR as it had evolved at that point in the UK. ( See CP 10/29 https://www.fca.org.uk/publication/consultation/cp10_29.pdf )
Meanwhile, the implications of RTS 27 have been widely flagged up, such as in the International Capital Market Association’s outline from late 2016: ICMA_MiFID2_Best Ex_October 2016_051016
Further details are available from the European Commission: http://ec.europa.eu/finance/securities/docs/isd/mifid/rts/160608-rts-27_en.pdf