MiFID II Best Execution

Best Execution requires investment firms (IFs) to provide the best available terms for the execution of client orders under MiFID II.

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Best Execution requires investment firms (IFs) to provide the best available terms for the execution of client orders under MiFID II. The most favourable terms for the execution of client orders include consideration of the following factors:

  • price;
  • cost;
  • speed;
  • likelihood of execution;
  • settlement size;
  • settlement nature; and
  • any other relevant consideration.

IFs must also create an execution policy and procedures, and regularly monitor the execution quality when executing orders on behalf of their clients.

All IFs must comply with Best Execution which is embedded in Article 27 of MiFID II.

Who is required to report?

RTS 27 reports – execution venues including trading venues, systematic internalisers (SIs), 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 obligations.

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

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 9 tables of data:

Table No.Data/Information
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 all IFs to demonstrate the top 5 execution venues that they used for client orders in each class of financial instrument.

When are reports to be published?

RTS 28 reports are to be published annually, as per the following table:

ReportsReporting PeriodPublication Date
RTS 281 January - 31 December30 April (following year)

TRAction’s Best Execution Monitor

As it stands, the obligation to publish RTS 27 reports is suspended until the end of 2021.

Our Best Execution Monitor is equipped to help you comply with the Best Execution reporting requirements. Learn more.

Further Information

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. Read more.

Out of all the regulations we discuss and assist with, RTS 27 is the one that causes the most anguish and frustration. Why? Read more.

TRAction has developed a solution to help you to comply with the Best Execution reporting requirements under MiFID II.

Our Best Execution Monitor operates as follows:

  1. Transaction data is submitted to TRAction either by file or through an API connection;
  2. TRAction compares this data against the Reuters one-minute high and low for the relevant time the trades were executed; and
  3. TRAction’s Best Execution Monitor then displays statistics about the quality and pricing of execution, including the 5 best and 5 worst transactions.

Read more.

A Systematic Internaliser (SI) is an investment firm which is a counterparty dealing with its proprietary capital and is not a trading venue.

The formal definition is provided in Article 4(1)(20) of MiFID II, which states that SIs are investment firms which on an organised, frequent, systematic and substantial basis, deal on own account when executing client orders outside a regulated market (RM), multilateral trading facility (MTF) or organised trading facility (OTF) (together, Trading Venues) without operating a multilateral system. Read more.