PRIIPs & MiFID 2 transaction costs for funds
Behind the scene of the drama
Complete cost transparency (including implicit transaction costs) is required under PRIIPs and MiFID 2 legislations for financial instruments and services.
What are transaction costs?
Compared to the simplified assumptions of a complete market with negligible transaction costs often used in economic modelling, in reality, there are costs intrinsically linked to the purchases and sales of financial instruments.
Both the Market in Financial Instruments Directive (MiFID 2) and the Packaged Retail & Insurance-based Investment Products (PRIIPs) Regulation require disclosure of transaction costs as part of the global costs disclosure. However, based on the market data used and the methodology employed, the compilation of transaction costs—the sum of explicit and implicit costs—results in significant variations within funds of the same strategy.
Performance magazine issue, 31 January 2020
Performance is a triannual digest, dedicated to investment management professionals, which brings you the latest articles, news and market developments from Deloitte’s professionals and clients.