Lack of Regulatory Feedback Puts Brokers in Precarious Position with MiFiDII

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A recent article in Trade News has brought up some important points regarding the best execution reporting brokers and financial institutions have had to submit to regulators in Europe as part of the MiFiDII directive. While some large banks have been fined as a result of errors found in the reporting they have submitted to regulators, it remains to be seen what will happen with other financial companies, including Forex brokers.

Trade News brings up information from a recent survey conducted by Cappitech, which highlights the fact that in the last 2 years only a third of all FX brokers who have submitted data to regulators for review as part of their RTS 27/28 requirements have received feedback from the regulator and that almost 70% of companies have not heard back at all. This puts both the regulators and brokers in a precarious position.

On one hand, regulators are expected to provide feedback in order for the broker to implement possible corrections, if any errors in the data are found, but when no such feedback exists, it is difficult for a broker to make any decisions on their own. While no brokers have been fined as a result of feedback received, it should not be a surprise if see fines being issued in the future from regulators, especially when noting the fact that of the brokers surveyed over 60% said they are not monitoring ‘best execution’ practices, even though required.

Both parties are faced with challenges in this situation – streamlining and standardizing the data submission and analysis for RTS reports and provide guidance on errors or non-compliance to brokers so they may properly execute the requirements. Accomplishing this will surely drive more brokers to start adhering to the requirements put forth 2 years ago, and, more importantly, help them understand the benefits of the data being generated to improve their business and trading experiences for customers.

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