ESMA has today published the latest Q&A on investor protection. The document spans many different topics, but what sparked my interest in particular are the comments around the best execution quality reports. Under MiFID II brokers have to publish their top 5 execution venues. Firms trading as non-members (i.e. via another broker) are asking whether it is the exchange or the broker that they need to name. ESMA clarifies that two separate quality reports are needed where distinct services are offered, one for the top 5 exchanges and another for the top 5 brokers. One might argue that this level of transparency is somewhat ‘uber’ the top. On 1st May 2018 (see Q6) I will be able to download a report from every firm’s website (see Q8) showing me the key business relationships they have with every single broker subject to MiFID II.
Considering that ESMA is also cracking down on the practice of paying for research with order flow, this new ‘uber transparency’ is set to change market structure significantly in the coming years.