On 16 July 2024, the European Securities and Markets Authority (ESMA) published a consultation paper on a new Regulatory Technical Standards (RTS) on the criteria for establishing and assessing the effectiveness of investment firms’ order execution policies.

The final texts of the Regulation amending MiFIR (MiFIR Review) and the Directive amending MiFID II (MiFID II Review) entered into force on 28 March 2024, with the MiFIR Review binding in its entirety and directly applicable in all Member States and a deadline of 28 September 2025 for Member States to transpose the MiFID II amendments into national law.

Further to MiFID II requirements that investment firms must take all sufficient steps to obtain the best possible result for their clients when executing orders and must establish and implement an order execution policy, the MiFID Review mandates ESMA to develop draft RTS specifying the criteria for establishing and assessing the effectiveness of firms’ policies. The criteria must take into account whether the orders are executed on behalf of retail or professional clients and include at least the following: factors determining the choice of execution venues included in the order execution policy; the frequency of assessing and updating the order execution policy; and the manner in which to identify classes of financial instruments. ESMA notes that in several jurisdictions some firms do not provide sufficiently documented analytical efforts to justify their choice of execution venues, do not demonstrate properly that they executed client orders in accordance with their order execution policies and disclose only generic information publicly about their order execution policy and steps taken to obtain the best possible result when executing client orders.  

A summary of the consultation proposals and questions can be accessed here.

The consultation closes on 16 October 2024. ESMA will then publish its Final Report and submit the draft RTS to the European Commission by 29 December 2024. The date of entry into application of the RTS is subject to its adoption by the European Commission and approval by the European Parliament and the Council of the EU. The RTS is proposed to enter into force 20 days following its publication in the Official Journal of the EU and will be binding in its entirety and directly applicable in all Member States.

If you have any questions regarding the consultation, please contact Aniqah Rao.