What Are the Core Data Requirements for an RTS 28 Best Execution Report?

Concept

The operational mandate known as Regulatory Technical Standard 28, or RTS 28, represents a fundamental data-driven pillar within the Markets in Financial Instruments Directive II (MiFID II) framework. Its primary function is to enforce a high degree of transparency in the execution practices of investment firms. The regulation compels these firms to systematically collect, analyze, and publicly disclose granular data concerning the venues where they execute client orders. This disclosure is not a mere statistical exercise; it is a mechanism designed to provide clients and the wider market with a clear, quantitative, and qualitative picture of how a firm fulfills its best execution obligations.

The data requirements serve as the evidentiary backbone for a firm’s execution policy, translating abstract principles of duty and care into a verifiable data trail. It forces a methodical examination of execution outcomes, moving the concept of best execution from a statement of intent to a domain of empirical analysis.

At its core, the RTS 28 framework is built upon two distinct but interconnected reporting components. The first is a quantitative disclosure of the top five execution venues utilized by the firm for each class of financial instrument. This is presented in a standardized tabular format, detailing not only the venues but also the volume and nature of the order flow directed to them. The second component is a qualitative summary.

This narrative report explains the conclusions of the firm’s internal monitoring and provides context to the quantitative data. It articulates how the firm has assessed and prioritized the key execution factors ▴ price, costs, speed, and likelihood of execution and settlement ▴ and justifies its choice of venues. This dual structure ensures that the market receives both the raw data of execution routing and the strategic reasoning that underpins it, creating a comprehensive transparency package.

The RTS 28 framework transforms best execution from a theoretical obligation into a quantifiable and publicly scrutinized practice.

It is important to situate these requirements within the current regulatory trajectory. 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. This development stems from a broader MiFID II review that anticipates the eventual removal of this specific reporting obligation, citing feedback that the reports were not widely used by investors for comparative purposes. However, this regulatory shift does not dismantle the foundational best execution duties prescribed by MiFID II.

The obligation to monitor execution quality, select venues that deliver the best possible outcome for clients, and demonstrate the effectiveness of these arrangements remains firmly in place. Therefore, the data points mandated by RTS 28 retain their immense internal value. For the systems-oriented firm, this evolution represents a pivot from a public compliance exercise to an internalized strategic imperative ▴ using the same granular data to build a more robust, intelligent, and defensible execution framework for competitive advantage.

Strategy

From Regulatory Burden to Strategic Asset

An advanced institution views the data architecture required for RTS 28 not as a sunk cost for compliance, but as the foundational infrastructure for a sophisticated execution intelligence system. The regulatory mandate to collect and structure this data provides a unique opportunity to build a powerful feedback loop for strategic decision-making. The process of systematically capturing venue, instrument, cost, and execution type data for every client order creates a rich, longitudinal dataset.

A forward-thinking strategy involves designing data warehouses and analytical tools that leverage this information far beyond the scope of generating a simple annual report. The objective is to transform this static data into dynamic intelligence that informs broker selection, refines algorithmic trading strategies, and uncovers hidden liquidity opportunities.

This strategic pivot begins with data integration. The data points for RTS 28 should not reside in a siloed compliance database. Instead, they must be integrated with the firm’s core Order Management System (OMS) and Execution Management System (EMS). This integration allows for real-time and post-trade analysis that connects execution outcomes with specific strategies, portfolio managers, or market conditions.

For instance, by analyzing the data, a firm can quantitatively assess which venues provide the best price improvement for aggressive orders in a specific equity during high-volatility periods. This insight can then be used to dynamically update the routing logic within the EMS, creating a self-optimizing execution policy. The data provides the evidence needed to move from a static, policy-driven routing table to a dynamic, data-driven one.

A Framework for Comparative Venue Analysis

The core of the RTS 28 data set is the comparison of execution venues. A robust strategy operationalizes this comparison into a continuous process of performance evaluation. This involves developing a proprietary scoring system for execution venues and brokers that weighs the execution factors according to the firm’s specific client profiles and business model.

For a firm dealing primarily with retail clients, the analysis might heavily weight total consideration ▴ the combination of execution price and all explicit costs. For an institutional desk, the weighting might be more complex, factoring in the speed of execution and the likelihood of completion for large orders to minimize market impact.

Leveraging RTS 28 data internally allows a firm to build a proprietary model of venue performance, turning regulatory compliance into a competitive edge in execution quality.

The following table outlines a strategic framework for this internal analysis, extending the basic RTS 28 requirements into a more powerful decision-making tool.

This analytical framework serves as a continuous due diligence engine. It provides the quantitative backing to justify the firm’s execution policy to clients and regulators. More importantly, it equips the trading desk with the intelligence to negotiate more effectively with brokers, to allocate order flow more intelligently, and to ultimately deliver superior execution outcomes that can be empirically demonstrated.

Execution

The Quantitative Reporting Mandate

The operational execution of RTS 28 hinges on the precise collection and formatting of quantitative data. For each class of financial instrument, a firm must identify its top five execution venues based on trading volume in the preceding year. The regulation provides a strict template for this disclosure, ensuring a degree of standardization across the industry. The objective is to present a clear snapshot of where a firm’s client order flow is directed.

The process begins with the correct classification of all financial instruments traded into the categories defined within Annex I of the regulation. This classification is the first critical step, as the reporting is done on a per-class basis. Once classified, all executed client orders from the reporting period must be aggregated to calculate total volumes and order counts per venue.

The following table provides a detailed representation of the required data fields for a single class of financial instruments, as specified in the RTS 28 Annex. This structure must be replicated for each relevant instrument class the firm trades.

A passive order is one that was entered into the order book and awaited execution, thereby providing liquidity. An aggressive order is one that took liquidity from the order book. Understanding the distinction and reporting it accurately is fundamental to demonstrating a sophisticated grasp of execution strategy.

The Qualitative Analysis Component

Beyond the quantitative tables, RTS 28 demands a comprehensive qualitative report. This summary is the firm’s opportunity to articulate the “why” behind the numbers. It is a narrative explanation of the firm’s execution monitoring process and the conclusions drawn from it.

This report must be clear, specific, and provide sufficient detail for clients to understand the firm’s execution policy and practices. The content of this report is not arbitrary; the regulation specifies several key areas that must be addressed.

The qualitative report is the critical link between a firm’s execution data and its strategic commitment to achieving the best possible client outcomes.

The following list details the core elements that must be included in the qualitative summary of execution quality:

• Execution Factors Analysis ▴ A detailed explanation of the relative importance the firm gives to the execution factors of price, costs, speed, likelihood of execution and settlement, size, nature, or any other consideration. This analysis must clarify how these factors are prioritized for different client types (e.g. retail vs. professional) and different financial instrument classes.
• Client Specifics ▴ A description of how client characteristics, including their classification as retail or professional, have influenced the firm’s execution strategy and choice of venues.
• Conflicts of Interest ▴ A clear disclosure of any close links, conflicts of interest, or common ownerships with respect to the execution venues used. The report must also detail any specific arrangements with execution venues regarding payments made or received, discounts, rebates, or non-monetary benefits.
• Venue-Specific Arrangements ▴ An explanation of any specific arrangements with execution venues that could affect execution outcomes. This includes details about fees, order routing incentives, or any other practices.
• Use of Execution Data ▴ An explanation of how the firm has used data and tools related to execution quality, including any data published by execution venues under RTS 27. This demonstrates that the firm is an active and informed consumer of market-wide execution data.
• Consolidated Tape Provider (CTP) Output ▴ Where applicable, an explanation of how the firm has used the output of a CTP to inform its execution analysis and venue selection.

Crafting this qualitative report requires a systematic approach. It necessitates a formal, documented process for the annual review of the firm’s execution policy, order routing arrangements, and the performance of its selected venues. The report must reflect the output of this internal governance process, providing a transparent and defensible account of the firm’s commitment to its clients’ best interests.

Reflection

Embedding Intelligence into the Execution Framework

The dissolution of the mandatory public disclosure of RTS 28 reports does not signal an end to the era of analytical rigor in trade execution. It marks its internalization. The data architecture and analytical processes originally built for compliance now become a proprietary system of institutional intelligence. The core question for any advanced trading entity shifts from “How do we report this data?” to “How do we weaponize this data for superior performance?” The framework provides the raw material to construct a deeply nuanced understanding of liquidity, venue behavior, and cost dynamics across the market landscape.

Consider the data points not as static fields in a table, but as variables in a complex equation that defines execution quality. How does the percentage of aggressive orders on a specific venue correlate with price reversion over the subsequent five minutes? At what order size does the certainty of execution on a lit market begin to decay, suggesting a shift to a block trading facility? These are the questions that a living, breathing execution system should be asking and answering continuously.

The data mandated by RTS 28 provides the foundational grammar for this inquiry. The ultimate value is realized when this analysis is automated, its insights feeding directly back into the routing and scheduling logic of the firm’s EMS, creating a system that learns, adapts, and refines its own performance in a dynamic market environment.