Investment firms in the EU and UK are no longer required to publish the RTS 27 quarterly reports in 2021. Confirmation that a two-year suspension of publishing quarterly RTS 27 reports has already commenced has been received from both the European Commission and the UK’s Financial Conduct Authority (FCA). Whilst the European Securities and Markets Authority (ESMA) encourages National Competent Authorities (NCAs) not to prioritise supervisory action towards investment firms during the suspension.
Confusion arose when the enforcement date of the RTS 27 suspension seemed to be inconsistent with the entry into force of the Quick-Fix Directive published on 26 February 2021. Responding to industry enquiry, the European Commission confirmed the effective date of the two-year suspension:
“The legislative aim is to suspend the best execution reports for two years as of the day following the entry into force of the amending directive…The consequence of this is that the reports would no longer need to be published in 2021. Member States’ delegations are aware of this legislative aim and have been informed accordingly.”
Therefore, the two-year suspension of publishing quarterly best execution reports has been applicable since 27 February 2021 and will continue until 28 February 2023.
ESMA issued a Public Statement on 31 March 2021 to promote coordinated action by NCAs in relation to the RTS 27 suspension. ESMA expects NCAs not to prioritise supervisory actions towards investment firms’ obligation to publish RTS 27 reports “until the date on which the national transposition measures of Quick-Fix Directive postpone that obligation in national law”.
Whilst investment firms no longer have an obligation to publish the RTS 27 reports, completing the reports internally remains of value, particularly as it addresses the continuing requirement to monitor:
- time to execute; and
It also encourages investment firms to rectify any deficiencies that the monitoring may expose.
The FCA announced on 19 March 2021 that it will not take action against firms who do not produce RTS 27 for the rest of 2021. It is preparing to review the RTS 27 reporting obligation, understanding the concerns that the reports fail to provide any significant value to the market and to consumers in addition to the burden involved in producing these reports.
This supervisory flexibility forms part of FCA’s attempt to level the playing field between UK and EU investment firms. It is expected that the FCA will have concluded their policy with regard to the future of these reports by the end of 2021.
RTS 28 Reminder
RTS 28 is still in force for EU and UK investment firms. The report must be published by 30 April 2021. Investment firms are required to summarise and publish their top five execution venues in terms of trading volume and information on the quality of execution obtained for each class of their financial instruments. Although often grouped together with RTS 27, for now they need to be clearly distinguished.
The Future of RTS 27 and RTS 28
As pointed out in a previous article, even ESMA noted that there currently appears to be little evidence on the efficacy of best execution reporting including RTS 27 and RTS 28. ESMA noted the distinct lack of engagement by investors with these reports as providing further indication that very little, if any, meaningful comparisons or conclusions are being drawn from the reports.
As to whether RTS 28 will remain in the future, we continue to await the European Commission’s comprehensive MiFID II review proposal this year. Nevertheless, it is an important reminder that CFD providers should continue to comply with all best execution requirements excluding the publishing RTS 27 in the meantime.
How can TRAction help you?
We understand that the preparation of RTS 27 and RTS 28 can be difficult. That is why TRAction provides complimentary assistance preparing RTS 27 and RTS 28 for those signed up to our best execution monitoring services.
If you need assistance with developing your RTS 27 or RTS 28 reports or wish to discuss this article with us, please do not hesitate contact us.