The MiFID II Delegated Regulation requires firms to periodically monitor the records of transactions and orders subject to these requirements including relevant conversations and that the monitoring shall be risk based and proportionate. How should these requirements be applied?

Answer 3

The monitoring of records of relevant telephone conversations and electronic communications is necessary to assist the firm in ensuring that it is meeting the recording requirements and also adhering to its wider regulatory obligations under MiFID II. For example, it will assist the firm in meeting its wider regulatory obligations which include but are not limited to having policies and procedures in place in respect of its client order handling, best execution, own account dealing obligations and the deterrence and detection of market abuse.

In determining the firm’s approach to monitoring the recording requirements, which includes the frequency and scope of such monitoring, ESMA expects firms to put in place arrangements which are appropriate to the nature, size and complexity of its business.