FIX Standardizes MiFID II Best Execution Reporting
The FIX Trading Community, the non-profit, industry-driven standards body has released guidelines on best execution reports under new regulations which should simplify aggregation and make the data more useful.
MiFID II, the regulations coming into force for financial markets in the European Union in January 2018, introduces new requirements for reporting best execution across asset classes under two standards – RTS 27 and 28. In addition to extending reporting outside equities, MiFID II also requires reporting on voice trades for the first time.
Members of the FIX MiFID best execution working group came from both the sellside, buyside, venues and vendors. The group has spent the past two years discussing the reporting standards, engaging with EU national regulators and other industry associations.
Alex Wolcough, director of Appsbroker and FIX MiFID best execution working group contributor, told Markets Media that hundreds of people were involved in the group and more than 80 people would attend regular meetings in order to each consensus.
“RTS 27 asks for information on how well orders are executed but the technical format was unclear and open,” he added. “Standardizing the output requirements means that it is relatively straight forward to aggregate the data across venues, which should be really useful for the industry.”
The FIX Trading Community has detailed which entities must report under MiFID II, the data they must publish and how often.
Rebecca Healey, co-chair EMEA regulatory subcommittee, FIX Trading Community, and head of EMEA market structure and strategy atLiquidnet, said in a statement: “With the MiFID clock ticking, it was critical for all market participants to be able to deliver accurate best execution reports to the regulator in time. By providing the regulator and the wider industry with standardized information on best execution, FIX has made an important contribution to necessary enhanced transparency around best execution.”
Wolcough continued that the first RTS 27 reports for the first quarter of next year are due by June 2018 at the latest.
“However, the first RTS 28 reports are due on 3 January 2018 and that may catch out some buyside firms,” he added. “There remain challenges over adoption, as FIX does not have a regulatory mandate and can’t force firms and venues to use the format, as well as whether all this new data will actually prove useful for clients and venues.”
The FIX Trading Community develops the FIX family of standard to standardize trade communications and reduce costs and inefficiency but adoption is voluntary. In order to cut the time for adoption and improve accuracy of implementations the community has developed FIX Orchestra,a set of machine readable rules, this year. Issues for corrections and proposed enhancements may be entered for future versions within the FIX Orchestra GitHub project.
In April Jim Northey, FIX Global Technical Committee co-chair and senior vice president, strategy and research at Itiviti Group AB, told Markets Media that Orchestra could re-engineer the entire FIX eco-system.
Northey said Orchestra could extend the life of the FIX standard by addressing the issue of large differences in the way the standards are implemented across the industry.
“Adopters that make the investment in FIX Orchestra need it to support all of the various protocols, for order routing, trading, clearing, settlement, market data, not just the traditional FIX messaging,” added Northey. “If vendors and the FIX community fully embrace Orchestra, we could see as a side effect that the adoption of FIX would continue to increase. FIX adoption is still growing globally, Orchestra could help increase the growth rate.”
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