In What Ways Does the Best Execution Reporting under RTS 28 Influence a Client’s Choice of Broker?

Concept

The architecture of the client-broker relationship was fundamentally re-engineered by the introduction of Regulatory Technical Standard 28, commonly known as RTS 28. This regulation is a transparency mandate, a system designed to replace subjective assurances of performance with a verifiable, data-driven framework. It compels investment firms to annually disclose their top five execution venues for each class of financial instrument, accompanied by a detailed report on the quality of execution achieved. This is not a mere compliance exercise.

It is a structural shift that injects quantifiable evidence into the dialogue, moving the selection of a broker from a decision based on relationships and reputation to one grounded in empirical performance analysis. The core of RTS 28 is the requirement that brokers explain, in sufficient and understandable detail, precisely how they execute client orders.

This mandate provides institutional clients with a powerful analytical toolkit. For the first time, a standardized dataset allows for the direct comparison of brokers based on where they route orders and the outcomes they achieve. The reports illuminate the complex pathways of order execution, revealing a broker’s reliance on various types of venues such as regulated markets, multilateral trading facilities (MTFs), systematic internalisers (SIs), or other liquidity providers.

This transparency directly addresses the inherent information asymmetry that has long characterized the brokerage industry. A client can now systemically assess whether a broker’s execution strategy aligns with their own objectives, whether that is prioritizing price, speed, likelihood of execution, or minimizing implicit costs.

RTS 28 reporting transforms broker selection by providing clients with standardized data to quantitatively assess execution quality and venue choices.

The regulation effectively creates a competitive marketplace for execution quality. Brokers are no longer able to operate their execution desks as opaque black boxes. Their choices are rendered visible, their performance metrics are subject to scrutiny, and their value proposition must be articulated through data. This has profound implications for a client’s due diligence process.

The annual RTS 28 disclosures serve as a recurring, evidence-based performance review, enabling clients to validate their broker’s claims and identify potential conflicts of interest, such as an over-reliance on an in-house systematic internaliser which may not always provide the best possible outcome for the client. The entire system is designed to empower the client, arming them with the necessary intelligence to hold their execution partners accountable and make informed, optimal choices for their capital.

Strategy

An institutional client can weaponize the data from RTS 28 reports, transforming it from a regulatory filing into a core component of their broker review and selection strategy. The primary strategic utility lies in comparative analysis. By systematically harvesting and normalizing these reports from their panel of brokers, a client can build a private, internal league table of execution performance.

This process moves beyond the qualitative assurances of a sales pitch and into the realm of quantitative, evidence-based decision-making. The reports provide the raw material to dissect a broker’s operational DNA, revealing their true execution philosophy and capabilities.

How Does RTS 28 Data Inform Strategic Broker Evaluation?

The strategic evaluation of a broker through their RTS 28 report hinges on analyzing the data through the lens of the client’s own execution policy. A client whose primary objective is minimizing market impact for large-cap equity orders will scrutinize the report differently than a client focused on achieving the keenest price on highly liquid fixed-income instruments. The data allows for this tailored analysis.

For instance, a high percentage of volume directed to a broker’s own systematic internaliser might be a red flag, suggesting a potential conflict of interest where the broker prioritizes internalizing flow over sourcing superior liquidity from the broader market. Conversely, a broker demonstrating a sophisticated and diversified use of various venues, including MTFs and dark pools for specific order types, signals a more client-aligned execution strategy.

By comparing venue usage and execution quality metrics across brokers, clients can strategically align their order flow with the provider best suited for their specific needs.

The summary of execution quality is where the most critical strategic insights are found. This qualitative section, when combined with the quantitative venue data, paints a full picture. A broker’s explanation of how they manage conflicts of interest, their criteria for venue selection, and their analysis of execution costs provides a direct window into their operational integrity. A client can compare these narratives across brokers to identify the partner whose philosophy and technological infrastructure most closely match their own requirements for governance and performance.

This strategic analysis extends to identifying brokers with specialized expertise. A broker whose report demonstrates superior execution quality in a specific, less liquid asset class becomes a valuable potential partner for that segment of the client’s business.

A Comparative Framework for Broker Analysis

To execute this strategy, a client can construct a comparative matrix. This tool allows for an objective, side-by-side assessment of broker capabilities as revealed by their RTS 28 disclosures. The goal is to translate the regulatory data into actionable intelligence, identifying clear performance leaders and laggards within the client’s broker panel.

Execution

The operational execution of leveraging RTS 28 reports requires a disciplined, systematic process. It is an intelligence-gathering and analysis cycle that, when properly implemented, provides a decisive edge in managing broker relationships and optimizing execution outcomes. This process can be broken down into distinct phases, from data acquisition and normalization to deep analysis and strategic action. The ultimate objective is to create a living, data-driven profile of each broker, allowing for dynamic allocation of order flow based on demonstrated performance.

A Procedural Guide to Using RTS 28 Reports

An institutional client, particularly a portfolio manager or head of trading, should establish a formal, repeatable procedure for analyzing these disclosures. This ensures consistency and allows for the tracking of broker performance over time.

1. Systematic Acquisition At the start of each reporting cycle (annually), the client must proactively gather the complete RTS 28 disclosure packages from every broker on their panel, as well as from any prospective brokers being considered. This includes both the quantitative tables of top-five venues and the qualitative summary of execution quality.
2. Data Normalization and Warehousing The raw reports, often published in PDF format, must be translated into a structured, comparable format. This typically involves creating a centralized database or spreadsheet where the data for each broker, across each asset class, can be viewed side-by-side. Key fields to capture include venue name, venue type (SI, MTF, etc.), percentage of volume, percentage of orders, and any provided cost metrics.
3. Quantitative Deep Dive Analysis This is the core analytical phase. The client must scrutinize the normalized data to identify patterns and anomalies. For example, for a specific asset class, how does Broker A’s venue distribution compare to Broker B’s? Is one broker disproportionately routing to high-cost venues or showing a significant reliance on their own SI? This phase is about identifying statistical outliers that warrant further investigation.
4. Qualitative Narrative Assessment The client must critically read the qualitative summary provided by each broker. This narrative should explain the ‘why’ behind the quantitative data. The client should assess the coherence and credibility of the broker’s explanation for their venue choices and their process for ensuring best execution. A vague or boilerplate summary is a significant red flag.
5. Integration with Internal Data The findings from the RTS 28 analysis should be cross-referenced with the client’s own internal data, such as Transaction Cost Analysis (TCA). If a broker’s RTS 28 report claims a focus on low-cost execution, but the client’s internal TCA shows consistently high slippage on orders given to that broker, it exposes a critical disconnect that must be addressed.
6. Strategic Broker Review Meeting The analysis culminates in the annual broker review meeting. Armed with specific, data-driven questions derived from the RTS 28 reports, the client can engage in a far more substantive conversation with their broker. Instead of asking “Are you getting me best execution?”, the client can ask “Your RTS 28 report shows 70% of our equity flow went to your own SI; our TCA shows this resulted in 5 basis points of slippage versus the arrival price. Can you explain the logic behind this routing decision and why alternative venues were not utilized?”

What Does Granular RTS 28 Data Reveal?

The true power of the RTS 28 framework is realized when a client examines the granular data tables for specific instrument classes. These tables provide the hard evidence needed to validate or challenge a broker’s execution strategy. Below is a simulated analysis of what a client might look for in a report for corporate bond trading.

From this table, a client can deduce several key characteristics of the broker. The heavy reliance on their own SI for liquid instruments is a critical point for discussion. The client must press the broker to provide evidence that this internalization consistently results in better prices than could be achieved on an open MTF.

The sophisticated use of multiple MTFs and a dedicated OTC channel for different types of trades, however, suggests a nuanced and capable execution desk. This data transforms the broker-client dialogue from one of trust to one of verification.

The Evolution of Best Execution Reporting

It is important to note that the regulatory landscape is dynamic. In February 2024, the European Securities and Markets Authority (ESMA) issued a statement indicating that national regulators should not prioritize supervisory actions related to the publication of RTS 28 reports, pending a review and amendment of MiFID II. This has been interpreted by some as a deprioritization of the requirement. However, the underlying obligation for firms to achieve and demonstrate best execution remains firmly in place.

Strategically, this means that while the specific format of RTS 28 may evolve, the principle of data-driven execution analysis is now deeply embedded in the market. Sophisticated clients will continue to demand this level of transparency from their brokers, whether it is delivered through a formal RTS 28 report or through other means of providing execution quality data. The influence of this transparency mandate on broker selection is therefore permanent; it has fundamentally and irreversibly shifted the basis of competition to one of demonstrable, quantifiable performance.

Reflection

Calibrating Your Execution Architecture

The integration of RTS 28 data into your operational framework is a significant step. It represents a move towards a system of continuous, evidence-based optimization. The data itself, however, is merely an input. Its ultimate value is determined by the quality of the analytical architecture you build around it.

How does your firm’s current due diligence process measure up to the potential offered by this level of transparency? Does your team possess the analytical rigor to translate these disclosures into actionable intelligence, or are they treated as a perfunctory compliance document?

Reflect on the flow of this information within your own system. Is it siloed within the compliance department, or is it a central pillar of the dialogue between your portfolio managers, traders, and risk officers? The most advanced institutions view this data not as a report card on their brokers, but as a diagnostic tool for their own execution strategy.

They use it to ask deeper questions about their own order placement logic and to challenge their own assumptions. The framework of transparency initiated by the regulation provides a unique opportunity to refine your own internal systems, ensuring that every component of your trading process is calibrated for optimal performance in a market that increasingly rewards quantifiable results.