MiFID 1 (Directive 2004/39/EC) introduced a set of principles and rules on best execution, taking into account price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order. These rules were supplemented by level 2 measures (Article 44 of the Directive 2006/73/EChttp://www.esma.europa.eu/system/files/Dir___73_2006.pdf) detailing the criteria investment firms should take into account when executing client orders to obtain the best possible result for their clients.
The European Securities and Markets Authority (ESMA) has conducted a peer review on how national regulators (national competent authorities or NCAs) supervise and enforce these MiFID provisions.
ESMA found that the level of implementation of best execution provisions, as well as the level of convergence of supervisory practices by NCAs, is relatively low.
“The overall findings in this report show that the standard of supervision to ensure the implementation of MiFID’s best execution requirements falls short of its aim of ensuring that retail investors receive the best outcome when trading securities. […] It is important that this situation is addressed in the interests of Europe’s investors,” commented Steven Maijoor.
Read ESMA’s press release and the peer review report.