European Union : ESMA42-1643088512-2962 Follow-up Report to the Peer Review on Best Execution

Follow-up Report to the Peer Review on Best Execution

11 January 2017 | ESMA42-1643088512-2962

1. Executive Summary 3

2. Introduction 6

3. Assessment Method 6

4. Overview of the Progress made 8

5. Detailed Findings of the Follow-up 12

6. FSC Bulgaria 12

7. CySEC Cyprus 14

8. Finanstilsynet Denmark 17

9. EFSA Estonia 19

10. HCMC Greece 21

11. MNB Hungary 22

12. FMA Liechtenstein 24

13. LB Lithuania 28

14. FCMC Latvia 30

15. MFSA Malta 31

16. KNF Poland 34

17. FSA Romania 38

18. Finansinspektionen Sweden 40

19. SMA Slovenia 43

20. NBS Slovakia 44

21. Annex - Statements from National Competent Authorities 46

22. Acronyms used

    MiFID - Directive on markets in financial instruments (Directive 2004/39/EC)

    MiFID2/MiFIR - Directive on markets in financial instruments (Directive 2014/65/EU, repealing Directive 2004/39/EC) and the Regulation on markets in financial instruments (MiFIR, Regulation 600/2014)

    NCA - National Competent Authorities

    Table with the 15 NCAs involved in the follow-up assessment

    BG	Financial Supervision Commission	FSC
    CY	Cyprus Securities and Exchanges Commission	CySEC
    DK	Finanstilsynet	Finanstilsynet
    EE	Estonian Financial Supervision Authority	EFSA
    EL	Hellenic Capital Market Commission	HCMC
    HU	Magyar Nemzeti Bank	MNB
    LI	Finanzmarktaufsicht	FMA
    LT	Lietuvos bankas	LB
    LV	Financial and Capital Markets Commission	FCMC
    MT	Malta Financial Services Authority	MFSA
    PL	Komisja Nadzoru Finansowego	KNF
    RO	Financial Supervisory Authority	FSA
    SE	Finansinspektionen	Finansinspektionen
    SI	Securities Market Agency	SMA
    SK	National Bank of Slovakia	NBS

    1 Executive Summary

23. Peer reviews are key tools in assessing the degree of existing supervisory convergence and setting out where future necessary convergence should occur. However, convergence can only be achieved if assessment of the outcomes is reviewed and where necessary remedial actions are taken and implemented into national supervisory practices. It is therefore of utmost importance to monitor follow-up actions taken by national competent authorities (NCAs) to address the findings of any peer review.

24. This report provides an update on the actions NCAs have undertaken further to the 2015 Peer Review on Best Execution under MiFID. MiFID's best execution requirements are an important component of investor protection as they are designed to promote both market efficiency generally and the best possible execution results for investors individually.

25. The 2015 peer review report found that the level of implementation of best execution provisions, as well as the level of convergence in the general supervisory practices by NCAs, was relatively low1 . In particular, 15 NCAs were found not applying or partly applying criteria considered essential for ensuring an effective best execution under MiFID. As a result, the 2015 Peer Review report encouraged NCAs to devote sufficient attention and resources to the supervision of best execution as well as to pro-actively monitor compliance with best execution both through desk-based reviews, by employing a variety of information sources, as well as through on-site inspections2.

26. The follow-up work was launched in September 2016 through letters by ESMA's Chair addressed to those 15 NCAs that were found not compliant or partially compliant.

27. Information gathered shows clear improvements in the level of attention that NCAs pay to the supervision of best execution requirements. In general, a more pro-active supervisory approach is applied to monitoring compliance with best execution requirements and best execution appears to have been given higher prioritisation as a conduct of business supervisory issue.

28. Based on the information communicated to ESMA, it appears that most NCAs have taken general or specific action that should allow for an effective application of the best execution provisions, directly or indirectly.

29. As regards general actions reported, several NCAs (BG, CY, EE, LI, LT, LV, RO) indicated that they had introduced or reinforced risk-based supervision of best execution after the 2015 peer review. While the characteristics of such risk based approaches vary in terms of information sources, considered risk factors or in the way the risk-based

1 Paragraph 43 of the February 2015 Report.

2 Paragraphs 45, 46, 48 of the February 2015 Report