What Are the Key Data Points an Ems Must Capture to Prove Best Execution under Mifid Ii? ▴ Question

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Concept

An Execution Management System (EMS) under the MiFID II framework is conceived as a data-architectural necessity. Its primary function transcends mere order routing; it is the central repository for evidence, the system of record that substantiates a firm’s adherence to its best execution obligations. The mandate to achieve the best possible result for clients is absolute, and the EMS is the apparatus through which this mandate is proven. It captures the high-velocity, multi-dimensional data streams that form the narrative of an order’s lifecycle.

This is about constructing a verifiable audit trail, a complete and incorruptible log of every decision point and market interaction from the moment an order is conceived to its final settlement. The regulatory view is that without this data, an assertion of best execution is an unsubstantiated claim. Therefore, the EMS must be engineered to capture not just the outcome, but the context, the intent, and the rationale behind every execution decision.

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The Architectural Pillars of Execution Data

The structure of MiFID II’s best execution requirements rests on several core factors that an investment firm must consider when executing client orders. An EMS is designed to capture data points corresponding to each of these pillars, creating a holistic picture of execution quality. These are the foundational elements upon which a defensible best execution policy is built.

Each data point captured by the EMS serves to quantify the firm’s performance against these explicit criteria, transforming a qualitative obligation into a quantitative, evidence-based process. The system must log every variable that influences the outcome, providing the raw material for both real-time decision-making and retrospective analysis.

A firm’s ability to prove best execution is directly proportional to the granularity and completeness of the data captured by its Execution Management System.

The primary execution factors are price, costs, speed, and likelihood of execution and settlement. The EMS must capture data that directly measures these outcomes. For instance, price is measured not just by the final execution price but also by comparing it against a relevant benchmark at the time of the trade. Costs are not limited to explicit fees and commissions but also encompass implicit costs like market impact, which can only be estimated through sophisticated data analysis.

The speed of execution is a critical metric, measured in milliseconds, reflecting the efficiency of the routing and execution process. The likelihood of execution is a pre-trade metric, assessing the probability of completing an order without adverse price movements, a factor that is heavily dependent on the chosen venue and order type.

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What Is the Role of Data in the Execution Policy?

The data captured by the EMS serves a dual purpose. First, it provides the evidence required to demonstrate compliance with the firm’s stated best execution policy to regulators and clients. This is the defensive function. Second, and more strategically, this data provides the foundation for refining and improving the execution policy itself.

This is the offensive function. By analyzing historical execution data, firms can identify patterns, assess the performance of different venues and algorithms, and make data-driven adjustments to their routing logic. An EMS, in this context, becomes a learning system, a tool for continuous improvement that enhances execution quality over time. This continuous feedback loop, powered by granular data, is the hallmark of a sophisticated and effective execution framework.

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Strategy

A strategic approach to MiFID II compliance involves architecting the EMS to function as the central nervous system of the trading lifecycle. This system must integrate seamlessly with pre-trade analytics, in-flight order management, and post-trade analysis and reporting. The strategy is to ensure a continuous, unbroken chain of data custody, where every decision, every market data tick, and every action is timestamped, logged, and attributed. This data strategy is bifurcated into two primary streams ▴ data for real-time execution optimization and data for post-trade regulatory proof and analysis.

The former enables the trading desk to make informed decisions dynamically, while the latter constructs the evidentiary record required by regulators. Both streams originate from the same core data points captured within the EMS.

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Pre Trade and Post Trade Data Regimes

The data capture strategy is logically divided by the point of execution. The pre-trade regime focuses on capturing the state of the market and the rationale for the chosen execution strategy before the order is sent. The post-trade regime captures the results of that strategy and the conditions under which it was executed. The EMS is the bridge between these two states, capturing the instantaneous transition from potential to actual execution.

Pre-Trade Data ▴ This includes snapshots of the order book across potential execution venues, prevailing bid-ask spreads, and available liquidity. The EMS must also log the specific parameters of the execution algorithm chosen, the trader’s instructions, and the justification for selecting a particular venue or strategy. This data answers the question ▴ “Why was this specific path chosen?”
Intra-Trade Data ▴ This is the high-frequency data captured during the order’s life. It includes every child order generated, every route taken, every fill received, and the latency of each step. This data provides a granular, millisecond-by-millisecond account of the execution process.
Post-Trade Data ▴ This encompasses the final execution price, time, venue, and total costs. Crucially, it also includes data for Transaction Cost Analysis (TCA), such as slippage against various benchmarks (e.g. arrival price, VWAP). This data answers the question ▴ “What was the outcome, and how did it compare to the available alternatives?”

The strategic value of an EMS is realized when it transforms from a simple order-routing tool into a comprehensive data-gathering and analytical engine.

The now-deprioritized, but conceptually still relevant, Regulatory Technical Standards (RTS) 27 and 28 illustrate this strategic division. RTS 27 required execution venues to publish detailed data about execution quality, providing a public benchmark. RTS 28 required investment firms to summarize where they sent client orders and the quality of execution achieved.

Although the reporting obligations for RTS 27 and 28 have been suspended by ESMA to reduce administrative burden, the underlying principle of transparency and the need for firms to internally monitor this data remains a core component of the best execution duty. The EMS is the primary source for the data that would populate these reports, and sophisticated firms continue to use these data points for internal analysis and oversight.

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Comparative Analysis of Execution Data Categories

To effectively prove best execution, an EMS must capture data across several distinct categories. Each category provides a different lens through which to view the quality of the execution. A failure to capture data in any one of these areas creates a blind spot in the firm’s evidentiary record. The table below outlines these critical categories and their strategic importance.

Data Category	Key Data Points	Strategic Importance
Order Characteristics	Instrument Identifier (ISIN), Order Type (e.g. Limit, Market), Validity (e.g. GTC, IOC), Client vs. Principal	Provides the fundamental context of the order. This data is essential for grouping similar orders for comparative analysis.
Pre-Trade Market Conditions	Consolidated Level 2 Order Book Snapshot, Best Bid and Offer (BBO), Quoted Spreads, Market Volatility Metrics	Establishes the market environment at the moment of decision, forming the basis for all benchmark comparisons.
Execution Details	Execution Venue (MIC), Execution Timestamp (to the microsecond), Fill Price(s), Fill Size(s), Counterparty ID	Forms the core factual record of what happened. This data is non-negotiable and must be captured with absolute precision.
Costs and Charges	Explicit Commissions, Venue Fees, Settlement Charges, Taxes (e.g. FTT)	Quantifies the direct cost of execution, a primary component of the “total consideration” under MiFID II.
Algorithmic Parameters	Algorithm Name (e.g. VWAP, TWAP), Aggressiveness Setting, Start/End Times, Limit Prices	Documents the specific instructions given to the execution logic, proving that the chosen strategy was implemented as intended.

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Execution

The execution phase of a MiFID II data strategy is where the architectural plan meets the reality of market microstructure. It requires the EMS to be configured with meticulous precision to capture a granular set of data fields for every single order. This is a technical and operational challenge that demands robust system integration, high-precision clock synchronization, and a deep understanding of data formats like the FIX protocol. The goal is to create a dataset so complete that it can reconstruct the entire lifecycle of any order, allowing an auditor or compliance officer to replay the trade and validate every decision made by the firm’s systems and traders.

The Operational Playbook for Data Capture

Implementing a compliant data capture system is a procedural task. It involves a systematic approach to logging information at each stage of the order workflow. The following steps represent an operational playbook for ensuring the EMS captures the necessary data points.

Order Inception and Validation ▴ When an order is received from the Order Management System (OMS) or created directly, the EMS must immediately timestamp its arrival and log its initial characteristics. This includes the client ID, instrument, size, side, and any special instructions. This initial record is the genesis of the audit trail.
Pre-Trade Snapshot ▴ Before routing the order, the EMS must query market data sources and capture a complete snapshot of the consolidated order book for the instrument. This includes the BBO from all potential execution venues. This snapshot becomes the primary benchmark against which the final execution price will be measured.
Routing Decision Logic ▴ The EMS must log the decision of the smart order router (SOR) or the trader. This includes the selected venue(s), the chosen algorithm, and the specific parameters. If a manual override occurs, the system must require the trader to input a justification code.
In-Flight Order Monitoring ▴ As the parent order is broken into child orders and routed, the EMS must track each one. It must log every new order message (NewOrderSingle), every cancellation (OrderCancelRequest), and every modification (OrderCancelReplaceRequest). Each message must be timestamped.
Execution Confirmation ▴ Upon receiving a fill (ExecutionReport), the EMS must log all details with microsecond precision. This includes the execution price, quantity, venue, time, and any associated fees passed back from the venue. For partially filled orders, this process is repeated for each fill.
Post-Trade Reconciliation ▴ After the order is fully executed or expires, the EMS must collate all the captured data into a final record. This record is then passed to the Transaction Cost Analysis (TCA) system for slippage calculation and to the firm’s data warehouse for regulatory reporting and long-term storage.

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How Should an Ems Structure Its Data Fields?

The core of the execution framework is the data model. The EMS must have a clearly defined schema for storing best execution data. The following table provides a granular, field-level view of the essential data points an EMS must capture, mapping them to the relevant MiFID II execution factors and providing examples of technical implementation, such as FIX protocol tags.

A defensible best execution process is built on a foundation of precise, timestamped, and contextually rich data points.

Data Point	Description	MiFID II Factor	Example FIX Tag
Arrival Timestamp	The precise time the order was received by the firm’s system.	Speed, Costs	60 (TransactTime)
Instrument Identifier	Unique code for the financial instrument (e.g. ISIN).	Price, Costs	48 (SecurityID)
Order Quantity	The total number of units for the order.	Likelihood of Execution	38 (OrderQty)
Benchmark Price	The market mid-price at the time of order arrival.	Price	N/A (Calculated Field)
Execution Venue	The MIC code of the venue where the trade was executed.	Price, Costs, Speed	30 (LastMkt)
Execution Timestamp	The precise time the fill was executed at the venue.	Speed	60 (TransactTime on Fill)
Execution Price	The price at which the trade was executed.	Price	31 (LastPx)
Explicit Costs	All commissions, fees, and taxes associated with the trade.	Costs	12 (Commission), 118 (NetMoney)
Routing Instructions	The logic used by the SOR or trader to select the venue.	All Factors	81 (ProcessCode), 78 (NoAllocs)
Order Type	The type of order used (e.g. Limit, Iceberg).	Likelihood of Execution	40 (OrdType)

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References

European Securities and Markets Authority. “MiFID II Best Execution Q&As.” ESMA70-872942901-38, 2023.
European Commission. “Commission Delegated Regulation (EU) 2017/575 of 8 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards for the data to be published by execution venues on the quality of execution of transactions.” Official Journal of the European Union, 2017.
European Commission. “Commission Delegated Regulation (EU) 2017/576 of 8 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the annual publication by investment firms of information on the identity of execution venues and on the quality of execution.” Official Journal of the European Union, 2017.
Harris, Larry. Trading and Exchanges ▴ Market Microstructure for Practitioners. Oxford University Press, 2003.
Financial Conduct Authority. “Best execution or bust.” FCA, 2019.

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Reflection

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Is Your Data Architecture a Tool for Compliance or a Source of Alpha?

The completion of a trade marks the beginning of its life as a data asset. The systems and processes designed to capture the data points mandated by MiFID II fulfill a critical regulatory function. They create the evidentiary record necessary to withstand scrutiny. A deeper consideration, however, is whether this architecture is viewed within your organization as a defensive shield or an offensive weapon.

Is the collection of execution data a cost center dedicated to compliance, or is it an investment in a strategic asset that can be mined for performance insights? The data that proves you did not achieve a poor execution is the same data that can illuminate the path to a superior one. The ultimate value of this complex data fabric is determined by the vision of those who architect and utilize it. It can be a system that merely records the past, or it can be an engine that actively shapes a more profitable future.