New EU Regulations Drive Investment Firms to Enhance Execution Transparency
Recent updates by the European Securities and Markets Authority (ESMA) are set to reshape the landscape for investment firms and asset managers significantly. These regulatory changes focus on enhancing order execution practices and revising research payment frameworks under the MiFID II regulations.
Key Regulatory Updates from ESMA
On April 10, 2025, ESMA finalized its Regulatory Technical Standards (RTS), which establish guidelines for investment firms on how to assess and implement effective order execution policies. The primary objective of these updates is to ensure that firms consistently achieve the best execution outcomes for their clients.
Best Execution Outcomes
The key highlights of the new RTS include:
- Justification of Execution Venue Selection: Firms must provide rationale for their choice of execution venues.
- Instrument Categorization: Investment firms need to categorize financial instruments appropriately.
- Enhanced Internal Oversight: There will be a stronger emphasis on accountability at senior management levels regarding execution policies.
Revisions to the MiFID II Research Payment Framework
In conjunction with the RTS, ESMA has also released its final technical advice on the MiFID II research payment framework. This reform introduces significant changes to how firms manage research payments, allowing for greater flexibility and transparency.
New Rules for Research Payments
The updated rules stipulate:
- Firms may make joint payments for both execution and research services, regardless of the issuer’s size.
- Investment firms are required to disclose their remuneration methods and separate the costs associated with execution and research.
- There is an annual assessment mandate for evaluating the value of research provided.
Impact on Transparency and Investor Protection
These reforms are part of the EU’s broader initiatives aimed at enhancing transparency and bolstering investor protection. Both updates offer an 18-month implementation window for firms to adapt to the new regulations.
To stay informed about ongoing regulatory changes, visit [ESMA’s official website](https://www.esma.europa.eu) for the latest updates.
For more insights on investment regulations and compliance, check out our articles on investment regulations and research payments management.
