European watchdog: No evidence of systemic issue with transaction costs reporting

Steven Maijoor is the chair of The European Securities and Markets Authority

The European Securities and Markets Authority has not yet seen evidence of systemic disruptions created by new reporting rules on fund costs despite mounting industry pressure for a review.

Since 3 January under Mifid II, asset managers have had to reveal and openly state how much they are charging investors when they buy and sell investments in their funds, on top of the established ongoing charges figure.

Before Mifid II, fund managers were not obliged to report transaction costs but funds were still charging clients for them.

Since implementation, the new reporting rules have alarmed many asset managers because costs calculation rules risk revealing distorted figures especially when taking into account live market movements.

The new disclosure rules have also shown investors may have been paying a third more in transaction costs than previously thought.

Speaking at a recent fund conference in Luxembourg, ESMA chair Steven Maijoor said he is aware of firms’ concerns about cost reporting, but has not yet received any examples of how these new rules could create systemic issues.

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He said: “We have taken these costs into account. But these are not just costs to your broker, they are also costs of buying and selling [securities], so the bid-off spread.

“The good thing about Mifid II and Priips is that they are not taking into account this loss of economic value. This shows active managers have difficulty to outperform.

“I have heard concerns on the application of [transaction cost calculations] but we also need evidence from the sector where this is causing systemic problems. So far we haven’t received any data. I have received letters, but no evidence. I understand the complexity but taking transition costs is the way forward.”

Responding to critics that ESMA and other regulators haven’t worked closely with firms on the application of the new rules, Maijoor said many companies were given enough time to prepare.

He said: “We do interact with the industry. The industry could have taken these measures in the early days. There has been the opportunity for the industry to be more transparent on its own initiative.”

Speaking in a tête-à-tête panel with Maijoor, European Fund and Asset Management Association director general Peter De Proft said the cost calculation issues for both Mifid II and Priips will be resolved.

He said: “We will publish some papers on Priips. It is also for the interest of the industry to come up with [some] evidence. There is basis for discussion.”


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