What Are the Specific Data Capture and Storage Requirements under RTS 28? ▴ Question

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Concept

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The Mandate of Evidenced Precision

Regulatory frameworks within financial markets are not abstract constructs; they are the operational DNA dictating how information flows and how accountability is maintained. The stipulations for data within RTS 28 are a direct reflection of a fundamental principle ▴ a firm’s duty of best execution must be a demonstrable, evidence-based process. This is not about mere compliance. It is about codifying a firm’s execution quality into a standardized, comparable format.

The core of RTS 28 is the transformation of a qualitative obligation into a quantitative disclosure, forcing a level of transparency that allows for empirical assessment of execution strategies. It compels an institution to look inward, to dissect its own order routing decisions, and to present the outcome of that analysis to its clients and the market at large.

The data capture requirements are, therefore, a direct consequence of this need for empirical validation. Each data point serves a specific purpose in reconstructing the firm’s execution narrative for a given period. The selection of the top five venues, for instance, is a focusing mechanism, concentrating the analysis on the most significant channels of liquidity. The breakdown by client type acknowledges the differing execution needs and levels of sophistication between retail and professional investors.

The distinction between passive and aggressive orders provides insight into the firm’s trading strategy ▴ is it primarily capturing spread, or is it seeking immediate liquidity? Each piece of captured data is a tile in a mosaic that, when assembled, reveals the firm’s true execution philosophy in practice.

RTS 28 mandates a granular, evidence-based disclosure of a firm’s order execution practices, transforming the qualitative duty of best execution into a quantitative, publicly scrutinized report.

The storage requirements are an extension of this principle of accountability. Data must be retained not just for the purpose of the annual report, but for subsequent analysis, for regulatory inquiry, and for internal review. The five-year retention period mandated by MiFID II is a recognition that patterns of execution quality, and any potential deficiencies, may only become apparent over longer time horizons.

It ensures that a firm’s execution history remains an open book, subject to scrutiny long after the trades themselves have settled. This long-term data accessibility is the bedrock of regulatory oversight and the ultimate guarantor of the best execution mandate.

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Strategy

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A Framework for Execution Intelligence

The strategic implementation of RTS 28 extends far beyond a simple data dumping exercise. It necessitates the development of a robust internal data infrastructure capable of not only capturing the required information but also of organizing and analyzing it in a way that yields actionable intelligence. A firm’s strategy for RTS 28 compliance should be viewed as a component of its broader risk management and execution optimization framework.

The data captured for the report can and should be used to refine order routing logic, to evaluate the performance of execution venues, and to identify potential conflicts of interest. This is the strategic value of the regulation ▴ it provides a non-negotiable incentive to build a more intelligent, self-aware execution system.

The classification of financial instruments is the first strategic consideration. A firm must decide on a classification methodology that is both compliant with the regulation and meaningful for its business. This may involve grouping instruments by asset class, by liquidity profile, or by other relevant characteristics.

The choice of classification will have a significant impact on the resulting report, and a well-considered strategy will ensure that the disclosures are both informative and not unduly burdensome to produce. A firm that trades a wide range of instruments may need to develop a more sophisticated classification system than a firm that specializes in a single asset class.

Strategically, RTS 28 compliance is an opportunity to build a more sophisticated execution framework, leveraging the mandated data capture for internal performance analysis and venue optimization.

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Venue and Counterparty Due Diligence

A critical element of the RTS 28 strategy is the ongoing due diligence of execution venues. The report’s focus on the top five venues requires a firm to have a deep understanding of the execution quality offered by its primary liquidity sources. This involves analyzing not just the explicit costs of execution, but also the implicit costs, such as market impact and information leakage.

A firm’s strategy should include a regular review of its execution venue relationships, with a view to optimizing its order routing for the best possible outcomes for its clients. The RTS 28 report is, in effect, the public-facing output of this internal due diligence process.

Quantitative Analysis ▴ The strategy must incorporate a quantitative approach to venue analysis. This involves the use of transaction cost analysis (TCA) to measure execution performance against various benchmarks. The data captured for RTS 28 can be a valuable input into this process, allowing for a more granular analysis of execution quality by venue, instrument, and order type.
Qualitative Factors ▴ The strategy should also consider qualitative factors in venue selection. These may include the venue’s market model, its technology infrastructure, and its regulatory status. A firm’s execution policy should document the factors that it considers when selecting execution venues, and the RTS 28 report should provide a summary of this policy.
Conflict Of Interest Management ▴ The RTS 28 framework forces a firm to confront potential conflicts of interest in its order routing decisions. The report’s requirement to disclose payments for order flow and other benefits received from execution venues brings these arrangements into the open. A firm’s strategy must include robust procedures for identifying and managing these conflicts, ensuring that its order routing decisions are always made in the best interests of its clients.

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Execution

The Operationalization of Transparency

The execution of RTS 28 requirements is a multi-stage process that demands a high degree of operational precision. It begins with the systematic capture of trade data at the point of execution and culminates in the public disclosure of a detailed, multi-faceted report. The entire process must be auditable, with a clear data lineage from the original trade ticket to the final report.

This requires a close integration of a firm’s trading, compliance, and technology functions. The operational playbook for RTS 28 is, in essence, a blueprint for the industrialization of execution quality monitoring.

The initial phase of the execution process is data capture. A firm’s order management system (OMS) and execution management system (EMS) must be configured to capture all the data points required by the regulation. This includes not just the basic trade details, such as the instrument, price, and quantity, but also the more nuanced data points, such as the client classification, the order type (passive, aggressive, or directed), and the execution venue.

The data must be captured in a structured, consistent format to facilitate subsequent aggregation and analysis. This often requires significant investment in data infrastructure and a close collaboration with technology vendors.

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The Operational Playbook

The operational playbook for RTS 28 can be broken down into a series of distinct steps, each with its own set of challenges and considerations. The following is a high-level overview of the key stages in the process:

Data Aggregation ▴ The first step is to aggregate all the relevant trade data for the reporting period. This data will typically be drawn from multiple sources, including the firm’s OMS, EMS, and back-office systems. The aggregation process must be robust and auditable, with clear procedures for handling data quality issues.
Data Enrichment ▴ Once the data has been aggregated, it must be enriched with additional information, such as the classification of financial instruments and the identification of execution venues. This may require the use of external data sources, such as market data vendors and regulatory databases.
Calculation And Analysis ▴ The next step is to perform the calculations required by the regulation. This includes identifying the top five execution venues for each class of financial instrument, and calculating the various metrics, such as the percentage of passive and aggressive orders. This stage of the process requires a high degree of analytical rigor, and the results must be carefully validated before they are included in the report.
Report Generation ▴ The final step is to generate the RTS 28 report in the prescribed format. The report must be published on the firm’s website in a machine-readable format, such as XML. The firm must also provide a summary of its execution policy and a qualitative assessment of the execution quality obtained from its top five venues.

The entire process must be supported by a strong governance framework, with clear roles and responsibilities for all stakeholders. The firm’s compliance function will typically have overall responsibility for the RTS 28 process, but it will need to work closely with the trading desk, the technology team, and other business units to ensure that the report is accurate, complete, and timely.

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Quantitative Modeling and Data Analysis

The quantitative analysis required for RTS 28 is a non-trivial exercise. The following tables provide a simplified illustration of the data that must be captured and reported for a single class of financial instrument.

Top Five Execution Venues – Retail Clients
Class of Financial Instrument	Venue Name	Venue Identifier	Volume of Orders Executed (%)	Number of Orders Executed (%)	Passive Orders (%)	Aggressive Orders (%)	Directed Orders (%)
Equities – Large Cap	London Stock Exchange	XLON	45.2	51.3	60.1	39.9	2.5
Equities – Large Cap	Cboe BXE	BXE	22.1	18.9	45.7	54.3	1.2
Equities – Large Cap	Turquoise	TRQX	15.8	14.2	55.2	44.8	0.8
Equities – Large Cap	Aquis Exchange	AQXE	10.5	9.6	30.9	69.1	0.5
Equities – Large Cap	Systematic Internaliser A	SINTA	6.4	6.0	N/A	N/A	100.0

Execution Quality Summary
Factor	Relative Importance	Summary of Analysis
Price	High	Continuous monitoring of execution prices against the European Best Bid and Offer (EBBO). Use of third-party TCA providers to benchmark performance.
Costs	High	Negotiation of competitive fee schedules with all execution venues. Regular review of clearing and settlement costs.
Speed of Execution	Medium	Monitoring of latency for all order types. Use of smart order routers to optimize for speed where appropriate.
Likelihood of Execution	High	Analysis of fill rates for all order types. Prioritization of venues with high levels of liquidity and certainty of execution.

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References

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.
Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU.
European Securities and Markets Authority. (2024, February 13). ESMA public statement on reporting requirements under RTS 28. ESMA.
Financial Conduct Authority. (2021, December 1). Markets Conduct (FCA) Sourcebook. FCA Handbook.
Harris, L. (2003). Trading and Exchanges ▴ Market Microstructure for Practitioners. Oxford University Press.

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Reflection

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From Mandated Disclosure to Strategic Insight

The evolving regulatory landscape, with the prospective removal of the RTS 28 reporting obligation, prompts a deeper reflection on the ultimate purpose of such frameworks. The operational muscle memory developed to comply with these requirements should not be allowed to atrophy. The capacity to capture, analyze, and interpret execution data is a strategic asset, independent of any specific regulatory mandate. It is the foundation of a firm’s ability to understand its own performance, to optimize its trading strategies, and to demonstrate its value to its clients.

The questions that RTS 28 sought to answer remain as relevant as ever. Where are our clients’ orders being executed? What is the quality of that execution? Are we fulfilling our duty of best execution in a demonstrable way?

The firms that will thrive in the coming years are those that continue to ask these questions, not because they are compelled to by a regulator, but because they are driven by a culture of continuous improvement and a commitment to delivering the best possible outcomes for their clients. The true legacy of RTS 28 may not be the reports themselves, but the enhanced level of execution intelligence that they have fostered within the industry.