Transaction costs: our solutions for PRIIPs and MiFID reporting

PRIIPs/MiFID II transaction costs

Deloitte can provide assistance in the various steps of transaction costs compilation with a flexible approach that fits with your data, process and regulatory requirements.

Currently, the transaction costs methodologies for MiFID II and PRIIPs are similar. But transaction costs can also be used in UK reports such as DCPT and CTI.

Deloitte actively performs a monitoring of regulatory updates on the calculation methodologies.

Features: Compilation Services

Explicit transaction costs compilation at different levels

• On each transactions
• In trial balances or accounting extracts

Implicit transaction costs compilation through the new PRIIP methodology

• Based on client transaction data
• Based on client data mapping: instrument type, currency, order price, date, rating
• Client data enrichment tool: if some information are not available, Deloitte can help to source it directly such as for example market caps, risk countries, EMTs of underlying funds.
• Flexible selection of client half bid-ask matrix

Implicit transaction costs compilation through the Arrival Price methodology

• Based on client transaction data including Arrival Price
• Based on client data mapping: instrument type, Market, currency, order price, date, timestamp
• Arrival Price can be sourced by Deloitte through a market data provider Our clients can benefit from Deloitte’s access for economies of scale in the cost of mid-market and spread data
• Possibility to apply hybrid model (per asset class) based on the data availability
  

Anti-dilution proceed

• Use of accounting extracts
• If no data available, estimation of the anti-dilution proceeds can be performed based on parameters of the anti-dilution technique
  

Regulatory changes and migration to new PRIIPs RTS live in Jan 2023

Since PRIIPs regulation came into force, the financial industry has raised the issue of negative transaction costs when applying the initial methodology published in the 2017 RTS, which can be misleading to retail investors.

In that context, it comes as no surprise that the revised regulatory technical standards published in 2021 bring about methodological changes for the transaction costs disclosure.

One of the main changes is that transaction costs can no longer be negative – anti-dilution benefits can be applied only if the result is not lower than the explicit costs, and a minimum of explicit costs should be disclosed.
Also, the new RTS allows for the turnover methodology (“new PRIIPs methodology”) to be used until the end of 2024 for UCITS and AIFs publishing a UCITS KIID, however the collection of arrival prices is already required in order to compute the 3-year averages.

It is important to be aware that the transaction costs changes are one out of many brought about by the new RTS. Continue to our article here to read more about the upcoming challenges as well as specific ways you can prepare for a successful migration.

Our team can help you deal with all these changes as part of our comprehensive solution. Do not hesitate to contact us for more information on how we can assist you in this area.

Transaction costs used in regulatory reporting