PS21/20: Changes to UK MiFID’s conduct and organisational requirements

Consultation opened: CP21/9
Consultation closed
Policy statement

We set out our final policy position and rules on changes to the research rules and the removal of the best execution reporting in RTS 27 and RTS 28 following feedback to CP21/9.

Read PS21/20 (PDF)

Why we are changing our rules 

The UK Markets in Financial Instruments Directive (MiFID) is the collection of laws regulating the buying, selling and organised trading of financial instruments. We see the fundamental requirements in MiFID as continuing to provide important protections. 

However, there are areas where markets have evolved, or objectives are not being met as efficiently as possible.

The changes we are making are intended to ensure that the rules for research and best execution are better tailored and more proportionate to the risks arising. This should remove unnecessary regulation, make the requirements less complex and make these markets work better.

Our rule changes aim to improve the availability of research on SME firms by providing an exemption to the inducements rules that prohibit the bundling of research and execution fees. Separately, the changes we are making to best execution reporting are intended to relieve trading venues and brokers from preparing and publishing best execution reports that don’t appear to benefit users. 

Our changes will also sit within wider reform work we are undertaking with the Treasury on capital markets.

Who this applies to 

Our final rules will affect: 

  • investment firms and market operators in the UK
  • banks and operators of Collective Investment Scheme who provide investment services 
  • persons providing investment advice and reception and transmission of orders who did not opt into MiFID (‘Article 3’ firms)
  • unauthorised persons providing research 

They will also be relevant to individuals who use the services of firms providing investment services, including pension funds and corporates. The rules will also be relevant to small companies whose shares are traded on public markets.

Background to the UK MiFID rule changes

In April 2021, we published Consultation Paper ‘Changes to UK MIFID’s conduct and organisational requirements’ (CP21/9), which proposed changes to two areas: research and best execution. 

In 2018, MiFID II introduced new inducement rules governing the provision of research. These rules require research to be priced separately from other services, such as execution services. In CP21/9, amongst other proposals, we proposed creation of an exemption from the inducement rules for research on SME issuers ie issuers below a market capitalisation of £200m.

We also proposed deleting the obligations on execution venues and firms to produce RTS 27 and RTS 28 reports on the basis that these have not delivered on these objectives, since they are little used by investors or firms with best execution obligations and are costly to produce.

Next steps 

From 1 December 2021, your firm will no longer be required to prepare RTS 27 and RTS 28 reports. 

From 1 March 2022, asset managers and research firms will be able to exercise the options on exempting the following from our inducement rules on research: research on SMEs below a market capitalisation of £200m,  FICC research, research provided by research providers who do not provide execution services and are not part of a group that includes a firm offering execution services and openly available research.