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Best Execution

Best Execution is embedded in Article 27 of MiFID II which requires investment firms to provide the most favourable terms for the execution of client orders with reference to:

  • Price
  • Cost
  • Speed
  • Likelihood of execution
  • Settlement size
  • Settlement nature
  • Any other relevant consideration.

It further requires investment firms to create an execution policy and regularly monitor the execution quality when executing orders on behalf of their clients.

3 steps to comply with Best Execution obligations

Accordingly, investment firms are required to take the following steps to comply with Best Execution:

  1. Publish RTS 27 reports and/ or RTS 28 reports on their website;
  2. Create and publish an execution policy based on the execution factors defined in RTS 27; and
  3. Establish an oversight process to monitor implementation of the execution policy.

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    • Who is required to report?

    RTS 27 reports – execution venues including trading venues, systematic internalisers, market makers and liquidity providers. In addition, ESMA considers CFD/ FX brokers who ‘deal on own account and regularly quote two-way pricing for an instrument’ would meet the definition of liquidity providers and therefore be subject to RTS 27 reporting obligations (Q18).

    RTS 28 reports – investment firms (including CFD/ FX brokers) who execute client orders through execution venues.

    When are reports submitted?

    While RTS 27 reports are submitted quarterly, RTS 28 reports are submitted annually. We have summarised the important dates in the following table:

    ReportsReporting PeriodPublication Date
    RTS 27
    1 January - 31 March30 June (same year)
    1 April - 30 June30 September (same year)
    1 July - 30 September 31 December (same year)
    1 October - 31 December31 March (following year)
    RTS 28
    1 January - 31 December30 April (following year)

    What information do I need to report?

    RTS 27 reports aim to demonstrate the quality of execution of transactions and are composed of the following nine tables of data:

    TableTable Description
    1Type of execution venue
    2Type of financial instrument
    3Intra-day price information
    4Daily price information
    5Cost information
    6Likelihood of execution information
    7Additional likelihood of execution information for continuous auction order book and continuous quote driven execution venues
    8Additional information for continuous auction order book and continuous quote driven execution venues
    9Additional information for quote execution venues
    RTS 28 reports require investment firms to demonstrate the top five execution venues that they used for client orders in each class of financial instrument.

    How can TRAction help?

    Find out how our Best Execution Monitor can help you to comply with the Best Execution reporting requirements.

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