Resumption of RTS 27 Reporting Obligation

What is an RTS 27 report?

There is a periodic reporting obligation outlined in Article 27(3) of Directive 2014/65/EU (''MiFID II''), which requires any "trading venue in financial instruments" to provide information on the quality of transaction execution on that venue to the public, free of charge, at least once a year.

The periodic reporting obligation is further specified in the European Commission's Delegated Regulation (EU) 2017/575 (the "RTS 27 Regulation"), which outlines the requirements that the report ("RTS 27 report") must meet to comply with the reporting obligation in Article 27(3) of MiFID II. In other words, "trading venues in financial instruments" fulfill the reporting obligation in MiFID II by preparing an RTS 27 report.

When will the RTS 27 reporting obligation be resumed?

In the aftermath of the COVID-19 pandemic, the European Commission adopted a legislative package in the financial sector known as the "Capital Markets Recovery Package". As the name suggests, it aimed to eliminate unnecessary bureaucracy and introduce carefully calibrated measures to reduce economic instability.

One of the measures in the European Commission's recovery package was the temporary suspension of the reporting obligation under Article 27(3) of MiFID II. This suspension was adopted on 17 February 2021 based on Article 1(6) of Directive (EU) 2021/338 (the "Recovery Directive").

In a public statement dated 14 December 2022, ESMA (European Securities and Markets Authority) announced that the suspension of the RTS 27 reporting obligation would end on 28 February 2023. This means that any "trading venue in financial instruments" will be required to resume the preparation of RTS 27 reports.

What does the future hold for the RTS 27 reporting obligation?

The future of the RTS 27 reporting obligation should be considered in light of other legislative developments in the EU. The European Commission has undertaken a comprehensive review of the reporting obligation in MiFID II, as required by the Recovery Directive. Additionally, on 25 November 2021 the European Commission published its proposal for amending MiFIR and MiFID II (the "MiFID II Amendment Proposal").

The MiFID II Amendment Proposal includes a specific proposal to discontinue the RTS 27 reporting obligation. Therefore, it appears that the RTS 27 reporting obligation has a limited lifespan, even though the European Commission has not yet completed its review of the reporting obligation. Already at the time of adopting the Recovery Directive, it was noted that RTS 27 reports are rarely read by investors and do not enable meaningful comparisons based on the information they contain.

What about RTS 28 reporting?

Whether RTS 28, which requires investment firms to publish similar annual reports, will be maintained in the future seems highly unlikely. However, there are currently no indications that this will be adopted alongside the MiFID II Amendment Proposal. Therefore, investment firms should continue to ensure compliance with the requirements in this regard.

Update on the MiFID II Amendment Proposal

We have chosen to take this opportunity at Lund Elmer Sandager to provide an update on the anticipated MiFID II Amendment Proposal.

The situation is that the MiFID II Amendment Proposal is being processed through the regular legislative procedure in the EU. The proposal is awaiting the approval of the Committee on Economic and Monetary Affairs (ECON), after which it can proceed to trialogue negotiations. Subsequently, the proposal must be approved by the European Parliament before the MiFID Amendment Proposal can be finally adopted.

Certain publicly available documents regarding the committee's work on the MiFID II Amendment Proposal also indicate that the committee supports the abolition of the reporting requirement in MiFID II.

Lund Elmer Sandager’s comments

The RTS 27 reporting obligation will apply again from 28 February 2023 and the entities covered by the reporting obligation will naturally have to resume reporting. The RTS 27 reporting obligation is quarterly and must not be published later than three months after the end of each quarter. Reporting for the period from 1 January to 31 March must therefore be published no later than 30 June.

As everything indicates that the RTS 27 reporting obligation will be abolished in the next amendment of MiFID II, it is our assessment that it is only a matter of time before the reporting obligation is eliminated. For the compliance departments of the entities covered by the obligation, this means that the compliance risk related to the reporting obligation is low. This viewpoint is also reflected in ESMA's public statement of 14 December 2022 which includes a direct call from ESMA to national supervisory authorities to prioritize downgrading the supervision of RTS 27 reports.

If you are employed in a compliance function at an entity subject to the RTS 27 reporting obligation and you may not have sufficient resources to comply with the reporting obligation, our team specializing in banking and finance law is ready to assist you with understanding or preparing RTS 27 reports.

As mentioned, the RTS 27 reporting obligation covers any "trading venue in relation to financial instruments," including any market (regulated market, MTF, or OTF) and any systematic internalizer subject to the trading obligation under Articles 23 and 28 of the European Commission's delegated regulation (EU) 600/2014 ("MiFIR").

If you want to know if you are subject to the reporting obligation or if you have other questions regarding RTS 27 reports, please contact our specialists, partner, attorney Kim Høibye or attorney Jakub Zakrzewski, for professional advice and clarification on these matters.

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[1] Commission Proposal 2021/0385(COD)

[2] Commission Proposal 2021/0384(COD)

[3] Commission Delegated Regulation (EU) 2017/576