EU Consultation on Firms' Order Execution Policies Under MiFID Review

The European Securities and Markets Authority has opened a consultation on proposed draft regulatory technical standards specifying the criteria for establishing and assessing the effectiveness of investment firms' order execution policies, accounting for whether the orders are executed on behalf of retail or professional clients. These proposals arise out of the MiFID Review, and the resulting changes to the Markets in Financial Instruments Regulation and Directive, which were published in March. We discuss these in our bulletin, "MiFID II: the EU's latest adaptations." The MiFID II best execution requirements oblige investment firms to obtain the best possible result for their clients when executing client orders, and require execution venues and investment firms to make data relating to the quality of execution of transactions publicly available.

ESMA is seeking stakeholder input on: (i) a proposed requirement for an investment firm's order execution policy to include the classification of financial instruments in which firms execute client orders and the initial selection of trading venues for order execution; (ii) the investment firm's procedures to monitor and regularly assess the effectiveness of its order execution arrangements and order execution policy; (iii) the investment firm's execution of client orders through own account dealing; and (iv) on how an investment firm should deal with client instructions.

The deadline for comments is October 16, 2024. ESMA expects to publish a final report and submit the draft RTS to the European Commission for endorsement by December 29, 2024.

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