The European Securities and Markets Authority (ESMA) has
initiated a consultation regarding draft technical standards. These standards
aim to define how investment firms should establish and assess the
effectiveness of their order execution policies. The primary goal of these
proposed standards is to enhance investor protection by improving the order
execution practices of investment firms.
Order Execution Policy Standards
ESMA is seeking input from stakeholders on several key
areas. First, the establishment of an investment firm’s order execution policy.
This involves classifying the financial instruments used for executing client
orders and selecting venues for the order execution policy.
Second, the investment firm’s procedures for monitoring and
regularly assessing the effectiveness of their order execution arrangements and
policies. Third, the execution of client orders through the firm’s own account
dealing. Lastly, how an investment firm should deal with client instructions
during order execution.
ESMA and EC Coordination
The revised texts of the Markets in Financial Instruments
Directive II (MiFID II) and the Markets in Financial Instruments Regulation
(MiFIR) came into effect on 28 March 2024. The deadline for transposing the
MiFID II amendments is set for 29 September 2025.
The amendments include many Level 2 measures that will be
developed over the next six to eighteen months. Additionally, these regulatory
changes will necessitate updates to ESMA’s IT systems and relevant MiFIR
registers.
ESMA is working with the European Commission (EC) to
evaluate which provisions require further guidance and clarification. The EC
has published a communication and an interpretative notice regarding the
transitional provisions, supplemented by an ESMA statement.
Feedback Deadline and Report
Throughout the implementation phase of the MiFID II/MiFIR
review, ESMA will consult the public on a series of technical standards. These
will be released in consolidated consultation paper packages. The timeline for
the adoption of Level 2 measures will depend on approval from the European
Commission, the European Parliament, and the Council of the EU. An
implementation period will also be provided where necessary.
ESMA will accept comments until 16 October 2024. Following
this period, ESMA will prepare a final report based on the feedback received,
which will then be submitted to the European Commission for the final draft of
the technical standards.
This article was written by Tareq Sikder at www.financemagnates.com.
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