While the principal of Best Execution has been around since MiFID I came into effect in November 2007, it seems the Financial Industry took some time to pay heed to the regulatory demands.

Investment Firm reviews by the FCA and the NCA Peer review by ESMA have highlighted some glaring compliance issues at both firm and regulator level and action is already being taken to align the European Community to comply with the current legislation.

MiFID II starts to tighten the screws by demanding a higher and equal standard of compliance across investment firms by changing the word “reasonable” to “sufficient” in the texts:

“Take all sufficient steps to obtain, when executing orders, the best possible result for their clients taking into account price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order.”

Some might consider this a subtle change but the intention is not and it shows that the EU Politicians expect the same standard, regardless of the size of firm.


Another important change is the need to produce Best Execution reports for MiFID II and it’s worth noting that these requirements are not in any way trivial!

Sycamore Financial Technology have been helping the FIX Trading Community to define these reporting requirements and has already identified 17 different reporting scenarios for Investment Firms and Execution Venues.

RTS 27 Reports: Execution Venues

Execution Venues, which includes Trading Venues, Systematic Internalisers and other Liquidity Providers trading OTC, will have to produce a report on a quarterly basis for every single instrument they quote or trade and then post this information on its website. The details are described in ESMA’s RTS 27 which has now been approved by the European Commission.

Electronic trading platforms won’t find these requirements too challenging (just extensive!) but information about voice trading needs to be accurately captured too and this will pose a challenge.

To give an example of just one attribute required from RTS 27: “the mean amount of time elapsed between a request for a quote and provision of any corresponding quotes, for all quotes in that financial instrument”. Talk to the Sales Desk at many of the European Banks about this requirement and you can imagine that they won’t be pleased!

Other required data points include intraday prices for instruments, costs associated with using the venue, likelihood of execution. Some 85 attributes to consider…

RTS 28 Reports and MiFID II Delegated Regulation Article 65 (Para 6): Investment Firms

Investment Firms will also need to produce an annual report stating the policy they follow to execute client orders and then data highlighting where client orders are actually executed. Again, this information must be posted on the firm’s website so it is publically available. The detail lies in ESMA’s RTS 28.

Client Execution Policies are already up on many firms’ websites today, although a significant amount of policy work will need to be done to bring them up to scratch.

On the face of it, the execution reports seem a little simpler, identifying the Top 5 Execution Venues by sub-asset class (and not by instrument) should be a data collection exercise but Article 65.6 of the MiFID II Delegated Regulation requires that orders given to brokers to execute should be reported separately from those orders traded directly on an Execution Venue..

It is not easy to see the complexity until you consider the workflows.

The Challenge and how we are helping

The key thing that any firm must take on-board is how complex this reporting requirement is. RTS 27 Reports bring significant challenges including:

  • The need to build a substantial amount of infrastructure just to capture the data points from Voice Trading.

  • The need to build appropriate data stores and reporting engines. Much of the existing Transaction Reporting technology is unsuitable because of the cross-transaction analysis required.

  • The need to produce standardised reports that are machine readable.

For the first two points, Sycamore Financial Technology has already been helping its clients build a business and technology strategy to respond to these challenges and projects now move ahead to deliver the needed infrastructure.

For the last point, Sycamore Financial Technology has been working with the FIX Trading Community to build a standard for RTS 27, RTS 28 and Article 65.6 Reports. This is important as the Buy-Side are obliged by MiFID II to consume the RTS 27 Reports as well as other suitable data to choose the most appropriate execution venues to execute client orders.

These standards will be discussed at the European FIX Trading Conference but do get in touch if you wish to learn more!