4.8.1 Preference between the two options included in consultation paper

Different views were expressed by stakeholders as to whether they agreed with the ESAs' preferred approach (Option 1) for amending the transaction cost methodology, or whether they preferred a more principles-based approach (Option 2). In addition, those respondents that expressed a preference for Option 2 also generally argued for the need for significant amendments to this option.

Taking into account these different views, the ESAs are still of the view that an approach based on Option 1 is preferred for the reasons stated in the consultation paper, namely the significantly greater risk of inconsistent applications for Option 2. However, the ESAs propose to make specific amendments to Option 1 taking into account the feedback received, as described further below.

4.8.2 The use of slippage and the arrival price

Many respondents raised objections to the use of the slippage methodology for calculating implicit transaction costs. In particular, they would like the methodology to be replaced by various proposals for a bid-ask spread (half-spread) methodology. Respondents' concerns related primarily to the perceived capture of market movements in the slippage methodology and the manner in which an "estimate" is presented in aggregate with "actual" (explicit) costs. Some respondents also argued that slippage is inconsistent with the MiFID II Directive because it captures market movements.