In October last year, ESMA announced change-proposals to MiFID II's best execution reporting obligations - namely RTS27 / RTS28.
Shortly following these proposals, the FCA announced the immediate suspension of RTS27 / RTS28 reporting obligations for FCA-regulated firms.
The RTS28 article mandated firms to report their top five venues for all trading, while RTS27 required trading venues to provide quarterly best execution reports.
Both ESMA and the FCA share the view that the obligations have “not delivered on their objectives” and the reports have not been used by investors or firms as intended. However, while ESMA has not yet concluded its review of the RTS27 and RTS28 rules, the FCA has taken a firm stance by scrapping the reports all together.
This is one of the first clear signs of divergence between the UK and Europe and could be a move by the FCA to attract businesses to the UK by reducing regulation.
We expect that FCA-regulated firms will welcome this development and it is likely that we will see more divergence away from ESMA rules throughout the year. However, while Best Execution rules will be easier for UK firms to comply with, diverging rulesets between the UK and Europe will overall create more complexity for firms operating in both regions since they will need to comply with two different sets of rules, all thanks to Brexit.
If you are impacted by these changes or want to discuss how you can futureproof your regulatory operations for future changes, please get in touch.
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