AMAFI Responds to ESMA Consultation Paper on the Review of the MiFID II Framework on Best Execution Reports

On September 24, 2021, European Securities and Markets Authority (ESMA) has released its Consultation Paper on the Review of the MiFID II Framework on Best Execution Reports (hereinafter referred to as "CP" or "the Document"), which is of interest to execution venues, investment firms and their associations, investors, consumer associations, as well as any market participant engaged in the execution of orders under the MiFID II framework.

ESMA noted that it would consider all comments received by Thursday, 23 December 2021.

Association française des marchés financiers (AMAFI), the trade organisation working at national, European and international levels to represent financial market participants in France, has recently tied with La Fédération bancaire française (FBF) and L'Association française des professionnels des titres (AFTI) to respond to the Document.

Below are some highlights of general comments by AMAFI in its response:

• Regarding the best execution reports required from trading venues in RTS 27, AMAFI had welcomed the suspension of their publication as provided by the MiFID II Quick Fix directive. The rationale behind the suspension of the publication of those reports was that they were rarely read and did not enable investors to make meaningful comparisons on the basis of the information they contained.

• In its cost-benefit analysis, ESMA cites a sole benefit expected from the proposed changes, that is making the RTS 27 reports "a complementary source of information" assisting the public and market participants in choosing the most suitable venue for their transactions. Regarding costs, the assessment does not consider the one-off costs entailed by the IT and operational resources that should be mobilised by firms. It also does not go into the detail of data aggregation depending on the new granularity levels expected from firms.

• Looking at all the elements drawn from the cost-benefit analysis, AMAFI strongly disagrees with ESMA's final assessment that the costs associated with the implementation of its proposal are proportional to the benefits and "fully justified" by the stated objectives. In fact, considering that the objective is providing a complementary source of information to market participants who already have mechanisms in place providing them with more complete and more immediate information, the costs inflicted on market participants for the sake of best execution reporting since the entry into force of MiFID II are highly disproportional to the expected benefits or aims of this policy.

• For all the reasons mentioned above, AMAFI does not believe that the stated objectives of the proposed changes are still relevant and call for the removal of the reports required under RTS 27. This would allow for a more pragmatic approach to the upcoming overhaul of the regulatory framework for financial instruments, where the rationalisation of regulatory costs will be crucial for all market participants. AMAFI believes that it is in the best interest of the markets to safeguard the resources deployed for regulatory implementation to serve more urgent purposes.

• ​Finally, AMAFI disagrees with the cost-benefit analysis. AMAFI believes that the execution required under RTS 28 has in itself a poor cost-benefit ratio. It follows that, while the potential proposals are welcome, their implementation is necessarily costly. Thus, AMAFI considers that the overall costs that would be associated with the implementation of the potential proposals are not proportionate to the benefits.