The European Securities and Markets Authority (ESMA) has published a report following its peer review on best execution under the Markets in Financial Instruments Directive (MiFID).
During the peer review ESMA reviewed how national regulators supervise and enforce the MiFID provisions relating to investment firms’ obligation to provide best execution, or obtain the best possible result, for their clients when executing their orders.
ESMA found that due to a number of factors, such as differing views on the application of the requirements, a lack of supervisory focus and market structure issues, the standard of supervision to ensure implementation of the MiFID best execution requirements fell short of the aim of ensuring that retail investors receive the best outcomes.
In response, ESMA identifies a number of areas for future work by itself and national supervisors that could promote a more coherent implementation across the EU, namely:
- providing guidance for national implementation of the MiFID rules to ensure a common understanding of the scope and obligations of the best executions requirements;
- assessing the adequacy of national supervisors’ internal resources devoted to best execution supervision, and the frequency and intensity of their active monitoring of best execution;
- providing guidance in order to ensure the development by national supervisors of clear internal processes or practices identifying the controls to be conducted when a firm has only one execution venue listed in its execution policy for a particular type of financial instrument;
- assessing whether obstacles exist to developing alternative execution venues; and
- examining the use of proportionate sanctions to ensure a credible deterrent effect against future breaches.
View ESMA publishes peer review on best execution under MiFID, 25 February 2015