ESMA’s finalisation of the RTS on Order Execution Policy and Research Payments Framework and What They Mean for Investment Firms and Asset Managers

In two significant updates this month, the European Securities and Markets Authority (ESMA) has clarified and expanded MiFID II rules affecting how investment firms and asset managers handle order execution and research payments.

Specifically, ESMA published the final report including Draft RTS specifying the criteria for establishing and assessing the effectiveness of investment firms’ order execution policies and the Final Report on the Technical Advice to the European Commission on the amendments to the research provisions in the MiFID II Delegated Directive in the context of the Listing Act.

Order Execution

In 2021, the European Commission adopted a legislative proposal to amend the Directive 2014/65/EU on markets in financial instruments(“MiFID”). The amending Directive (EU) 2024/790 was published in the Official Journal on 8 March 2024 and entered into force on 29 March 2024 (“MiFID Review Directive”). Pursuant to Article 1(4)(e) of the MiFID Review Directive, ESMA has been mandated to develop Regulatory Technical Standards (RTS) specifying the criteria for establishing and assessing the effectiveness of investment firms’ order execution policies.

On 10 April 2025, ESMA published its Final Report on Technical Standards specifying the criteria for establishing and assessing the effectiveness of investment firms’ order execution policies. The new RTS aim to ensure investment firms consistently deliver best execution, whether for retail or professional clients. ESMA has now set out the content for order execution policies which includes:

• Ensuring an internal order execution policy that meets the general criteria outlined in the RTS to achieve the objective of best possible outcome for clients;

• Outlining specific criteria for investment firms in their selection of execution venues and requiring firms to maintain an up-to-date list of internally approved venues;

• Establishing a more structured approach to categorising financial instruments for the purpose of executing orders;

• Justifying selection of execution venues (such as price, cost, speed, likelihood of execution and settlement etc.) and imposing additional requirements to apply when limited to a single venue, acting on a specific client instruction or when dealing on own account;

• Enhancing internal oversight and monitoring, through clear accountability at senior levels; and

• Increasing flexibility in how investment firms use and validate market data for execution decisions.

Investment firms should be aligning their systems and policies with these upcoming rules and achieve greater transparency for the market.

Revised Research Payments Framework

As part of the broader Listing Act Directive (Directive 2024/2811), the EU has allowed joint payments for execution services and research regardless of issuer market capitalisation. In this context, ESMA was tasked with providing technical advice and, on 8 April 2025, published its Final Report, proposing amendments to Article 13 of the Commission Delegated Directive 2017/593 (“MiFID Delegated Directive”) to reflect the updated rules on research payment arrangements. In its proposed amendments, ESMA has stated that:

• Where investment firms pays jointly for execution and research services (irrespective of choice of payment), investment firms and third-party must enter into an agreement clearly outlining the remuneration methodology including how the cost of research is generally taken into account..

• Investment firms are required to inform its client of its choice to pay either jointly or separately for execution services and research, and where it is provided jointly, how conflicts are managed under MiFID.

• Investment firms must assess on an annual basis the quality, usability and value of the research used, on the basis of ‘robust quality criteria’ for the purpose of such annual assessment.

• In compliance with its best execution requirements, investment firms paying jointly for execution services and research, must clearly know the costs that are directly relating to the execution of the order, and the research costs must be clearly separated when assessing execution quality.

 Next Steps For  Investment Firms and Asset Managers:

Both frameworks allow time for implementation, with order execution policies expected to comply within 18 months.

If you have any questions or would like to understand how these changes specifically affect your firm, feel free to reach out to Zeidler’s Legal Team.