More than half of capital markets firms have stated that they are not currently producing RTS 27 reports in compliance with MiFID II best execution requirements despite having a legal obligation to do so, according to new figures.
Regulatory and compliance technology provider Cappitech surveyed around 100 capital markets firms earlier this year across the UK and Europe, with best execution reporting seemingly the most problematic MiFID II requirement.
Of those surveyed, 56% of respondents who are legally obliged to produce RTS 27 best execution reports did not do so. Furthermore, 60% stated that they have no intentions to use the RTS 27 reports internally to shape execution policies.
MiFID II’s RTS 27 requires firms to report quarterly data on more than 50 variables that impact the quality of their trade execution, including price, cost, speed of execution and settlement, size and the nature of orders.
“Needless to say, it is not a trivial undertaking, although organisations with the wherewithal to manage these data-collection functions efficiently will be least affected, and might stand to gain to competitive advantage through better decision-making, and by comparing the quality of broker execution and commission,” the research said.
Cappitech’s survey also revealed that 65% of capital markets firms currently have no systematic method of monitoring their trades according to best execution criteria, despite tools such as transaction cost analysis (TCA) being widely available in the industry.
“Many firms still don’t define their best execution policies properly, and those that do don’t have a system to monitor their policies,” Ronen Kertis, CEO of Cappitech, commented. “That isn’t due to a lack of TCA products in the market, but because those products were designed to cater for the larger players that can invest a lot of money in the implementation of those tools, and are happy to pay firms six-digit price tags per annum for those services.”
Earlier this month, MEP Kay Swinburne told delegates at an industry event that Brexit will be the single biggest driver for MiFID III-type regulatory changes. She stressed that fundamental changes occurring across Europe will play a significant role in how the regulation is reviewed in the future.
“My concern now is that MiFID III will be shaped not by data resources, but by purely political objectives, and above all, it is going to be shaped very differently by the relationship going forwards between the UK and the EU,” Swinburne said. “So, MiFID III, as it is known in that nomenclature, may be a long time coming. But changes are happening now.”