How should investment firms provide ex-ante disclosure of information on costs and charges to clients when there is no available data on actually incurred costs?

Answer 14

Based on article 50(8) of the MiFID II Delegated Regulation, when calculating costs and charges on an ex-ante basis, an investment firm shall use actually incurred costs as a proxy for the expected costs and charges. There may be circumstances where such data is not (entirely) available, for instance during the first year after MiFID II has become effective, when an investment firm just started business or in the case of new clients. In these cases, the investment firm should make reasonable estimations of the expected costs and charges.

ESMA considers an estimation to be reasonable when it includes all variables that directly impact the costs and charges that are expected to be incurred by the client, using actual data to the extent available and making reasonable assumptions otherwise. Examples of such variables are in the case of executing a transaction:

• the type of financial instrument the client wants to buy or sell;

• the cost of the financial instrument, if any;

• the transaction size;

• the commission that will be paid to the broker for executing the order;

• stamp duty paid by the client