The requirement of publishing the RTS 27 Reports
The requirement of publishing the RTS 27 Reports is postponed for EU and UK Investment Firms, whilst RTS 28 publication requirement remains active.
Following the latest publication of the Quick-Fix Directive and the FCA announcement, EU and UK Investment firms are no longer required to publish the RTS 27 quarterly reports within the Year 2021. The two-year suspension of publishing quarterly best execution reports has been applicable since the 27th of February 2021 and will continue until 28 February 2023. Whilst investment firms have no longer the obligation to publish the RTS 27 reports, it is generally preferable to complete the reports internally so as to remain of value, particularly as it addresses the continuing requirement to monitor:
time for execution; and
rejection of orders.
Investment Firms are encouraged to rectify any deficiencies that the monitoring might expose! The British regulator announced on the 19th of March 2021, that no action will be taken against Investment Firms who do not publish the RTS 27 Forms for the rest of the year. The FCA comprehends 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. It is expected that the FCA will have concluded their policy with regard to the future of these reports by the end of 2021, in an attempt to level the playing field between UK and EU investment firms. RTS 28 Form Obligation The RTS 28 Form obligation is still in force for the EU and UK Investment Firms. The report must be published by the 30th of April 2021. Investment firms are required to summarize 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. Future progress of the RTS 27 and RTS 28 Forms In 2020, ESMA considered suspending best execution requirements, which we have now seen to crystalize for RTS 27 under the Quick-Fix Directive, implying that these measures would have no effect on consumer protection as investors are not reading the reports anyway. The reports were identified to be rarely read by investors, which was evidenced by the very low numbers of downloads from their website. It is therefore assumed that investors cannot or do not make any meaningful comparisons between firms on the basis of this data. The benefit to the cessation of these reports would mean investment firms are able to reallocate the resources and costs expended on the production of the reports to more beneficial avenues within the firm. As to whether RTS 28 will remain in the future, we will 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 the best execution requirements excluding the publishing of RTS 27 in the meantime. Should you have any questions or concerns, please do not hesitate to contact our team of professionals for further assistance!
Written by Christos Eleftheriou Junior Compliance Associate