The European Securities and Markets Authority (ESMA) has updated its Question and Answers (Q&As) regarding the implementation of the Market in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).

In response to question 15 in the Q&A On MiFID II and MiFIR investor protection and intermediaries topics, ESMA has now provided clarification that the reporting requirements laid out under RTS 27 of MiFID II do not apply to securities financing transactions (SFTs).

Below is the extract from the Q&A:

“Article 1(5)(a) of MiFIR, subsequent to amending Regulation (EU) 2016/1033 of 23 June 2016, states that SFTs are not subject to the pre and post trade transparency obligations set out in

Title II and III of MiFIR.

While no specific exemption was included with respect to the RTS 27 best execution reporting obligations, Recital 10 of RTS 27 refers to the need for regulatory consistency between its requirements and those on post trade transparency. In this context, ESMA considers that the best execution reporting requirements set out in RTS 27 should not apply to SFTs. ESMA wishes to make clear that, irrespective of the above clarification concerning the application of RTS 27 to SFTs, the MiFID II best execution requirements otherwise apply to investment firms when carrying out SFTs.

ESMA also wishes to clarify that while RTS 27 would not apply to SFTs, this would not lead to a complete absence of execution quality reports for SFTs, as RTS 28 explicitly requires investment firms to report, inter alia, on order routing behaviours specifically with respect to SFTs and to provide a summary on the quality of execution obtained. Investment firms should also note that RTS 28 already makes specific reference to how data concerning SFTs should be published.”

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