# How Do Regulatory Frameworks like MiFID II and FINRA Define Best Execution Differently for Principal versus Agency Trades in OTC Derivatives? ▴ Question

**Published:** 2025-08-07
**Categories:** Question

---

![A dark, sleek, disc-shaped object features a central glossy black sphere with concentric green rings. This precise interface symbolizes an Institutional Digital Asset Derivatives Prime RFQ, optimizing RFQ protocols for high-fidelity execution, atomic settlement, capital efficiency, and best execution within market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-protocol-control-system.jpg)

![A sleek, circular, metallic-toned device features a central, highly reflective spherical element, symbolizing dynamic price discovery and implied volatility for Bitcoin options. This private quotation interface within a Prime RFQ platform enables high-fidelity execution of multi-leg spreads via RFQ protocols, minimizing information leakage and slippage](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-institutional-digital-asset-derivatives-rfq-execution-hub.jpg)

## Concept

The obligation of [best execution](https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is a foundational principle in financial markets, representing a core fiduciary duty owed by a financial institution to its clients. It is the mandate to secure the most advantageous terms for a client’s order under the [prevailing market conditions](https://prime.greeks.live/area/prevailing-market-conditions/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This duty is not a monolithic, globally harmonized standard. Instead, it is interpreted and enforced through distinct regulatory structures that reflect the legal and market traditions of their jurisdictions.

The two most influential frameworks are the European Union’s Markets in Financial Instruments Directive II (MiFID II) and the United States’ [Financial Industry Regulatory Authority](https://prime.greeks.live/area/financial-industry-regulatory-authority/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (FINRA) [Rule 5310](https://prime.greeks.live/area/rule-5310/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). These regulations, while sharing a common goal of investor protection, diverge in their language, emphasis, and practical application, creating a complex compliance landscape for global financial institutions.

At the heart of this complexity lies the distinction between principal and [agency trading](https://prime.greeks.live/area/agency-trading/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), two fundamentally different modes of order execution. This distinction is particularly pronounced in the over-the-counter (OTC) derivatives market, a vast and privately negotiated space where liquidity is fragmented and price transparency can be limited. Understanding how [MiFID II](https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and FINRA differently define and regulate best execution in these two capacities is to understand the core philosophies of two of the world’s primary financial regulatory systems. The divergence is not merely academic; it has profound implications for a firm’s operational structure, its risk management practices, its technological architecture, and ultimately, its relationship with its clients.

![A sleek, light interface, a Principal's Prime RFQ, overlays a dark, intricate market microstructure. This represents institutional-grade digital asset derivatives trading, showcasing high-fidelity execution via RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-prime-os-execution-system.jpg)

## The Duality of Execution Roles

A financial firm’s capacity in a trade dictates its relationship with the client and the market, thereby shaping the nature of its [best execution obligation](https://prime.greeks.live/area/best-execution-obligation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The two primary capacities, principal and agency, represent a fundamental split in how a firm interacts with a client’s order and assumes risk.

![Overlapping grey, blue, and teal segments, bisected by a diagonal line, visualize a Prime RFQ facilitating RFQ protocols for institutional digital asset derivatives. It depicts high-fidelity execution across liquidity pools, optimizing market microstructure for capital efficiency and atomic settlement of block trades](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-microstructure-optimization-2.jpg)

## Principal Trading a Direct Counterparty Relationship

In a [principal trade](https://prime.greeks.live/area/principal-trade/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), the financial firm acts as a direct counterparty to its client, executing the order from its own inventory or “book.” The firm buys from the client for its own account or sells to the client from its own account. This model is prevalent in markets for less liquid or more customized instruments, such as many [OTC derivatives](https://prime.greeks.live/area/otc-derivatives/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The firm’s revenue is primarily generated from the bid-ask spread ▴ the difference between the price at which it is willing to buy (bid) and the price at which it is willing to sell (ask).

By acting as principal, the firm takes on market risk; if it buys an asset from a client, it is exposed to a potential decline in that asset’s value until it can offload the position. This direct assumption of risk is a defining characteristic of [principal trading](https://prime.greeks.live/area/principal-trading/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

> Best execution in a principal trade centers on the fairness of the price offered to the client, a price generated from the firm’s own models and risk appetite.

![Stacked, multi-colored discs symbolize an institutional RFQ Protocol's layered architecture for Digital Asset Derivatives. This embodies a Prime RFQ enabling high-fidelity execution across diverse liquidity pools, optimizing multi-leg spread trading and capital efficiency within complex market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-stack-for-high-fidelity-execution.jpg)

## Agency Trading the Intermediary’s Role

In an agency trade, the firm acts as an intermediary, or agent, on behalf of its client. Its role is to find a counterparty in the broader market to take the other side of the client’s trade. The firm does not use its own capital to fill the order and does not take on market risk from the trade itself. Its compensation is typically a commission or fee for its services.

This model is common for standardized, exchange-traded instruments but is also used in the OTC markets, particularly when a client seeks access to a wide range of [liquidity providers](https://prime.greeks.live/area/liquidity-providers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The best [execution obligation](https://prime.greeks.live/question/can-a-broker-fulfill-its-best-execution-obligation-by-solely-routing-to-a-pfof-venue/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) in an agency trade is focused on the firm’s diligence in sourcing liquidity and selecting the best venue or counterparty to achieve the most favorable outcome for the client.

![Angular, reflective structures symbolize an institutional-grade Prime RFQ enabling high-fidelity execution for digital asset derivatives. A distinct, glowing sphere embodies an atomic settlement or RFQ inquiry, highlighting dark liquidity access and best execution within market microstructure](https://options.greeks.live/wp-content/uploads/2025/08/prime-os-digital-asset-derivatives-rfq-execution-protocol.jpg)

## Navigating the Regulatory Labyrinth

The application of best execution principles to these two trading capacities is where the distinctions between MiFID II and FINRA become most apparent. For OTC derivatives, a market characterized by its bilateral nature and lack of a central price feed, the challenge of proving best execution is acute. The regulatory frameworks provide the rules of engagement, but their interpretation in this complex environment requires a deep understanding of both the letter of the law and the structure of the market itself.

- 
**MiFID II’s “[Sufficient Steps](https://prime.greeks.live/area/sufficient-steps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” Doctrine** The European framework, with its “[all sufficient steps](https://prime.greeks.live/area/all-sufficient-steps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” language, imposes a high-level, principles-based obligation on firms. It requires a comprehensive and demonstrable process for achieving the best possible result, considering a broad range of execution factors.

- 
**FINRA’s “[Reasonable Diligence](https://prime.greeks.live/area/reasonable-diligence/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” Standard** The U.S. framework, in contrast, uses the term “reasonable diligence.” While also principles-based, the language has been interpreted to place a strong emphasis on reviewing and comparing the quality of execution available from different market centers.

These subtle but significant differences in regulatory language and focus create distinct operational requirements for firms, particularly in the opaque world of OTC derivatives. The choice to execute a trade as principal or agent is not merely a business decision; it is a choice that determines which set of regulatory interpretations and expectations will apply, shaping the entire lifecycle of the trade from pre-trade [price discovery](https://prime.greeks.live/area/price-discovery/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) to post-trade analysis.

![Two intertwined, reflective, metallic structures with translucent teal elements at their core, converging on a central nexus against a dark background. This represents a sophisticated RFQ protocol facilitating price discovery within digital asset derivatives markets, denoting high-fidelity execution and institutional-grade systems optimizing capital efficiency via latent liquidity and smart order routing across dark pools](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-system-architecture.jpg)

![A metallic disc intersected by a dark bar, over a teal circuit board. This visualizes Institutional Liquidity Pool access via RFQ Protocol, enabling Block Trade Execution of Digital Asset Options with High-Fidelity Execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-principal-operational-framework-market-microstructure-high-fidelity-execution.jpg)

## Strategy

The strategic implementation of best execution policies [under MiFID](https://prime.greeks.live/question/what-are-the-operational-consequences-of-misreporting-under-mifid-ii-versus-a-reporting-failure-under-emir/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) II and FINRA requires a nuanced understanding of their divergent philosophies. While both frameworks aim to protect investors, they approach the problem from different angles, leading to distinct compliance strategies, especially in the context of OTC derivatives. The core of this divergence can be found in the language of the rules themselves ▴ MiFID II’s mandate for “all sufficient steps” versus FINRA’s requirement of “reasonable diligence.” This is not a mere semantic difference; it reflects a fundamental divide in regulatory posture. MiFID II places a greater emphasis on the holistic process and the ex-ante policies a firm has in place, while FINRA has historically focused more on the ex-post review of [execution quality](https://prime.greeks.live/area/execution-quality/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and the demonstrable diligence in seeking the best market.

For a firm operating in both jurisdictions, a single, unified [best execution policy](https://prime.greeks.live/area/best-execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is often insufficient. The strategies for compliance must be tailored to the specific requirements of each regime. This is particularly true when considering the different demands placed on principal and [agency trades](https://prime.greeks.live/area/agency-trades/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). In a principal capacity, where the firm is the market, the focus is on the fairness of the price.

In an agency capacity, where the firm is a conduit to the market, the focus is on the quality of the search. The following sections explore these strategic differences in detail, providing a comparative analysis of the two frameworks and their application to the distinct roles a firm can play in an OTC derivative transaction.

![A deconstructed spherical object, segmented into distinct horizontal layers, slightly offset, symbolizing the granular components of an institutional digital asset derivatives platform. Each layer represents a liquidity pool or RFQ protocol, showcasing modular execution pathways and dynamic price discovery within a Prime RFQ architecture for high-fidelity execution and systemic risk mitigation](https://options.greeks.live/wp-content/uploads/2025/08/modular-institutional-digital-asset-derivatives-execution-framework-dissected-for-optimal-rfq-performance.jpg)

## A Comparative Analysis of MiFID II and FINRA

To fully grasp the strategic implications of the two regimes, a direct comparison of their key components is necessary. The following table provides a high-level overview of the primary differences between MiFID II and [FINRA Rule 5310](https://prime.greeks.live/area/finra-rule-5310/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

| Feature | MiFID II | FINRA Rule 5310 |
| --- | --- | --- |
| Core Standard | “Take all sufficient steps to obtain the best possible result.” This is generally interpreted as a higher and more process-oriented standard than its predecessor’s “reasonable steps.” | “Use reasonable diligence to ascertain the best market. so that the resultant price to the customer is as favorable as possible.” The focus is on the diligence of the search. |
| Execution Factors | Explicitly lists price, costs, speed, likelihood of execution and settlement, size, nature, and any other relevant consideration. For retail clients, price and costs are paramount. | Lists character of the market, size and type of transaction, number of markets checked, accessibility of quotation, and terms and conditions of the order. Price is a critical, but not the sole, factor. |
| Application to OTC Derivatives | Explicitly applies to all financial instruments, including OTC derivatives. The lack of price transparency is a key challenge that firms must address in their policies. | Applies to all securities. Supplementary material provides specific guidance for fixed income and other securities with limited quotations, which is highly relevant to OTC derivatives. |
| Reporting and Disclosure | Requires firms to publish annual reports on their top five execution venues (RTS 28) and for venues to publish quarterly reports on execution quality (RTS 27). This creates a large volume of public data. | Requires firms to conduct “regular and rigorous” reviews of execution quality, at least quarterly. While there are order handling disclosure rules (Rule 606), the public reporting is less extensive than under MiFID II. |
| Conflicts of Interest | Has strict rules on inducements and requires firms to identify and manage conflicts. Payment for order flow (PFOF) is effectively banned for discretionary business. | Has a strong focus on conflicts of interest, particularly PFOF. Firms must demonstrate that any such arrangements do not interfere with their best execution obligations. |

![A dark, reflective surface displays a luminous green line, symbolizing a high-fidelity RFQ protocol channel within a Crypto Derivatives OS. This signifies precise price discovery for digital asset derivatives, ensuring atomic settlement and optimizing portfolio margin](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-pathway-optimizing-principal-liquidity-and-capital-efficiency.jpg)

## Best Execution in Principal Trades a Tale of Two Philosophies

When a firm acts as a principal in an OTC derivative trade, it is, in effect, creating the market for its client. The concept of “shopping around” for a better price is not directly applicable, as the firm itself is setting the price. Here, the best execution obligation shifts from a search for external liquidity to an internal process of ensuring a [fair price](https://prime.greeks.live/area/fair-price/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The two regulatory frameworks approach this challenge differently.

![A dynamic visual representation of an institutional trading system, featuring a central liquidity aggregation engine emitting a controlled order flow through dedicated market infrastructure. This illustrates high-fidelity execution of digital asset derivatives, optimizing price discovery within a private quotation environment for block trades, ensuring capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/principal-os-driving-high-fidelity-execution-for-digital-asset-derivatives-through-optimized-rfq-protocols-and-smart-order-routing.jpg)

## MiFID II the Focus on a Fair Price

Under MiFID II, a firm dealing on its own account must have a robust and consistent methodology for pricing its OTC instruments. The “all sufficient steps” standard requires the firm to demonstrate that its pricing model is fair, reasonable, and based on available [market data](https://prime.greeks.live/area/market-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This involves:

- 
**Gathering Market Data** Firms must gather and use relevant market data to calibrate their [pricing models](https://prime.greeks.live/area/pricing-models/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This can include data from trading venues, data providers, and other sources of observable transactions.

- 
**Independent Price Verification** The firm’s pricing should be subject to independent verification, either through a separate internal function or by comparing it to prices from other dealers or third-party valuation services.

- 
**Transparency** The firm must be transparent with its clients about its pricing methodology and any potential conflicts of interest.

> Under MiFID II, the integrity of the firm’s internal pricing process is the primary measure of best execution in a principal trade.

![A futuristic, metallic structure with reflective surfaces and a central optical mechanism, symbolizing a robust Prime RFQ for institutional digital asset derivatives. It enables high-fidelity execution of RFQ protocols, optimizing price discovery and liquidity aggregation across diverse liquidity pools with minimal slippage](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-platform-for-institutional-digital-asset-derivatives-rfq-protocol-optimized-execution-management-system-with-robust-liquidity-sourcing.jpg)

## FINRA the Prudent Dealer Standard

FINRA’s “reasonable diligence” standard, when applied to principal trades, is often framed in terms of a “prudent dealer” standard. While there may not be multiple markets to check for a bespoke OTC derivative, a dealer must still act diligently to ensure its price is fair. This can be demonstrated by:

- 
**Internal Consistency** The price offered to a client should be consistent with the prices offered to other similar clients under similar [market conditions](https://prime.greeks.live/area/market-conditions/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

- 
**Reference to Similar Instruments** Where possible, the price should be benchmarked against the prices of similar or related instruments, even if they are not perfect substitutes.

- 
**Documentation** The firm must be able to document the basis for its price and demonstrate that it was fair under the prevailing market conditions.

While the end goal is the same ▴ a fair price for the client ▴ the emphasis is subtly different. MiFID II is more prescriptive about the need for a comprehensive policy and the use of external data for validation. FINRA places a greater burden on the firm to document its diligence and justify its price in the context of the broader market, even if that market is illiquid.

![A precision mechanism, symbolizing an algorithmic trading engine, centrally mounted on a market microstructure surface. Lens-like features represent liquidity pools and an intelligence layer for pre-trade analytics, enabling high-fidelity execution of institutional grade digital asset derivatives via RFQ protocols within a Principal's operational framework](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-microstructure.jpg)

## Best Execution in Agency Trades the Search for Liquidity

When a firm acts as an agent for an OTC derivative trade, its best execution obligation is more straightforward ▴ to find the best possible outcome for its client by accessing a range of liquidity sources. Here, the differences between the two frameworks are more about the process of review and the management of conflicts.

![A diagonal metallic framework supports two dark circular elements with blue rims, connected by a central oval interface. This represents an institutional-grade RFQ protocol for digital asset derivatives, facilitating block trade execution, high-fidelity execution, dark liquidity, and atomic settlement on a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/optimized-institutional-digital-asset-derivatives-trading-system-rfq-protocols-and-atomic-settlement.jpg)

## MiFID II a Holistic View of Execution Quality

MiFID II [requires firms](https://prime.greeks.live/question/can-true-anonymity-exist-when-post-trade-settlement-requires-identity-disclosure-to-clearinghouses/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) to take a holistic view of execution quality when acting as an agent. The selection of an execution venue or counterparty should be based on the execution factors that are most important to the client. The extensive reporting requirements under RTS 27 and 28 are intended to provide firms with the data they need to make these decisions. A firm’s strategy for agency execution under MiFID II should include:

- 
**A Diverse Range of Venues** The firm’s order [execution policy](https://prime.greeks.live/area/execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) should include a diverse range of execution venues, including regulated markets, MTFs, OTFs, and other liquidity providers.

- 
**Data-Driven Venue Analysis** The firm must use the data from RTS 27 and other sources to regularly assess the execution quality of the venues in its policy.

- 
**[Smart Order Routing](https://prime.greeks.live/area/smart-order-routing/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)** For more liquid instruments, the use of smart order routers (SORs) that can dynamically select the best venue based on real-time market conditions is a key component of a best execution strategy.

![Intricate metallic mechanisms portray a proprietary matching engine or execution management system. Its robust structure enables algorithmic trading and high-fidelity execution for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-market-microstructure.jpg)

## FINRA the “regular and Rigorous” Review

FINRA’s requirement for a “regular and rigorous” review of execution quality is a cornerstone of its best execution rule. For agency trades in OTC derivatives, this means that a firm cannot simply route all its orders to a single liquidity provider without justifying that decision. A firm’s strategy under FINRA must include:

- 
**Quarterly Reviews** The firm must conduct and document quarterly reviews of the execution quality it receives from its chosen counterparties.

- 
**Comparison of Execution Quality** These reviews must compare the execution quality available from different sources, even if the firm does not regularly use all of them.

- 
**Management of PFOF** If the firm receives [payment for order flow](https://prime.greeks.live/area/payment-for-order-flow/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), it must be able to demonstrate that this does not compromise its ability to achieve best execution for its clients.

In essence, both frameworks require a data-driven approach to agency execution. However, MiFID II’s focus is on providing the market with a vast amount of public data to facilitate this analysis, while FINRA’s focus is on mandating a specific and frequent internal review process. The strategic challenge for firms is to build the systems and processes necessary to meet these distinct, but related, obligations.

![Glossy, intersecting forms in beige, blue, and teal embody RFQ protocol efficiency, atomic settlement, and aggregated liquidity for institutional digital asset derivatives. The sleek design reflects high-fidelity execution, prime brokerage capabilities, and optimized order book dynamics for capital efficiency](https://options.greeks.live/wp-content/uploads/2025/08/precision-engineered-digital-asset-derivatives-execution-via-optimized-rfq-protocols-enhancing-principal-operational-frameworks.jpg)

![A sleek green probe, symbolizing a precise RFQ protocol, engages a dark, textured execution venue, representing a digital asset derivatives liquidity pool. This signifies institutional-grade price discovery and high-fidelity execution through an advanced Prime RFQ, minimizing slippage and optimizing capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-protocol-integration-for-high-fidelity-execution-and-institutional-liquidity-aggregation-on-prime-os.jpg)

## Execution

The theoretical and strategic distinctions between MiFID II and FINRA’s best execution regimes translate into concrete operational requirements at the point of execution. For firms dealing in OTC derivatives, compliance is not a matter of abstract principles but of demonstrable, repeatable, and auditable processes. The execution of a best execution policy requires a sophisticated interplay of technology, data analysis, and human oversight.

The specific mechanics of compliance differ significantly depending on whether the firm is acting as a principal or an agent, and the operational playbook must be adapted accordingly. This section provides a granular, execution-focused analysis of how firms can build and maintain a compliant [best execution framework](https://prime.greeks.live/area/best-execution-framework/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) under both regulatory regimes.

![Sleek, intersecting metallic elements above illuminated tracks frame a central oval block. This visualizes institutional digital asset derivatives trading, depicting RFQ protocols for high-fidelity execution, liquidity aggregation, and price discovery within market microstructure, ensuring best execution on a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-system-for-optimal-execution.jpg)

## The Operational Playbook for Principal Trades

When a firm is the principal, its best execution obligation is an internal one ▴ to prove the fairness of its own price. This requires a robust internal framework for pricing and risk management. The following table outlines the key operational steps and considerations for a dealer executing a principal trade in an OTC derivative.

| Operational Step | MiFID II Considerations | FINRA Considerations | Technological Implementation |
| --- | --- | --- | --- |
| Pre-Trade Price Discovery | The firm must demonstrate that it has gathered sufficient market data to inform its price. This includes data from comparable instruments, competitor quotes, and third-party data sources. | The firm must be able to show “reasonable diligence” in assessing the market. This may involve documenting the absence of a liquid market and the rationale for the pricing of the instrument. | Integration of real-time data feeds from multiple sources into the firm’s pricing engine. Use of analytics to identify and filter relevant data points. |
| Pricing Model Validation | The firm’s pricing models must be independently validated on a regular basis. The validation process should be documented and auditable. | While less prescriptive than MiFID II, the “prudent dealer” standard implies that the firm’s pricing models must be sound and consistently applied. | A dedicated model validation team or function. Use of backtesting and stress testing to assess model performance under different market conditions. |
| Fair Price Determination | The final price must be justifiable in the context of the “total consideration” for the client, including all costs and charges. The firm must be able to explain its pricing to the client. | The price must be “as favorable as possible under prevailing market conditions.” The firm should document its assessment of these conditions at the time of the trade. | An automated pricing engine that incorporates all relevant factors, including market data, counterparty risk, and funding costs. A clear audit trail for every price generated. |
| Post-Trade Analysis | The firm must have a process for reviewing the quality of its execution on an ongoing basis. This includes comparing its prices to those of other venues and liquidity providers. | The “regular and rigorous” review process applies here as well. The firm must analyze its pricing performance and make adjustments to its models and processes as needed. | A transaction cost analysis (TCA) system that can analyze execution quality against a range of benchmarks. Regular reporting to senior management and compliance. |

![Symmetrical precision modules around a central hub represent a Principal-led RFQ protocol for institutional digital asset derivatives. This visualizes high-fidelity execution, price discovery, and block trade aggregation within a robust market microstructure, ensuring atomic settlement and capital efficiency via a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/principal-led-digital-asset-rfq-execution-system-microstructure.jpg)

## The Operational Playbook for Agency Trades

In an agency capacity, the firm’s execution obligation is external ▴ to find the best source of liquidity for its client. This requires a systematic approach to venue selection, [order routing](https://prime.greeks.live/area/order-routing/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), and performance monitoring. The following table details the operational steps for a broker executing an agency trade in an OTC derivative.

| Operational Step | MiFID II Considerations | FINRA Considerations | Technological Implementation |
| --- | --- | --- | --- |
| Venue Selection | The firm’s execution policy must list the venues it uses and the criteria for selecting them. The public data from RTS 27 should be a key input into this process. | The firm must be able to justify its choice of venues and demonstrate that it has not been unduly influenced by conflicts of interest, such as PFOF. | A centralized venue management system that stores information on all available liquidity providers. Automated analysis of venue performance based on a range of metrics. |
| Order Routing | The use of smart order routing (SOR) technology is encouraged to ensure that orders are sent to the venue that is most likely to provide the best outcome. | The firm’s routing logic must be designed to achieve best execution and should not be biased towards affiliated venues or those that provide rebates. | A sophisticated SOR that can be configured with customized routing strategies based on client preferences and market conditions. Real-time monitoring of SOR performance. |
| Execution Monitoring | The firm must monitor the quality of its executions in real time and have procedures in place to intervene if it is not achieving the best possible results. | The firm must have systems to detect and prevent “trade-throughs,” where a client’s order is executed at a price that is inferior to a protected quotation on another market. | A real-time dashboard that displays key execution metrics, such as fill rates, latency, and price improvement. Automated alerts for any potential best execution violations. |
| Transaction Cost Analysis (TCA) | TCA is a critical tool for demonstrating compliance with MiFID II. The firm must be able to provide detailed TCA reports to its clients and to regulators upon request. | The “regular and rigorous” review process is effectively a form of TCA. The firm must analyze its execution data to identify any areas for improvement. | A comprehensive TCA platform that can analyze execution costs across a wide range of benchmarks and provide detailed attribution analysis. The ability to generate customized reports for different stakeholders. |

![An abstract digital interface features a dark circular screen with two luminous dots, one teal and one grey, symbolizing active and pending private quotation statuses within an RFQ protocol. Below, sharp parallel lines in black, beige, and grey delineate distinct liquidity pools and execution pathways for multi-leg spread strategies, reflecting market microstructure and high-fidelity execution for institutional grade digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-displaying-multi-leg-execution-status-and-optimal-liquidity-pathways.jpg)

## The Role of Technology and Data

Underpinning any effective best execution framework is a sophisticated technology and data infrastructure. The ability to capture, process, and analyze vast amounts of data is essential for meeting the requirements of both MiFID II and FINRA. Key technological components include:

- 
**Data Management** A centralized data repository for storing all relevant market and execution data. This data must be accurate, complete, and easily accessible for analysis and reporting.

- 
**Connectivity** High-speed connectivity to a wide range of execution venues and data providers. This is essential for both price discovery and order routing.

- 
**Analytics** Advanced analytical tools for performing TCA, validating pricing models, and monitoring execution quality. Machine learning and AI can play an increasingly important role in this area.

- 
**Reporting** A flexible reporting engine that can generate the various reports required by regulators, clients, and internal stakeholders.

> A firm’s investment in technology is a direct reflection of its commitment to meeting its best execution obligations.

The execution of a best execution policy is a continuous and iterative process. It requires a constant cycle of monitoring, analysis, and improvement. By implementing the operational playbooks outlined above and investing in the necessary technology and data infrastructure, firms can build a robust and defensible best execution framework that meets the distinct challenges of both the MiFID II and FINRA regimes, regardless of whether they are acting as principal or agent in the dynamic and complex world of OTC derivatives.

![An abstract, reflective metallic form with intertwined elements on a gradient. This visualizes Market Microstructure of Institutional Digital Asset Derivatives, highlighting Liquidity Pool aggregation, High-Fidelity Execution, and precise Price Discovery via RFQ protocols for efficient Block Trade on a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-digital-asset-derivatives-rfq-market-microstructure-high-fidelity-execution.jpg)

## References

- Harris, L. (2003). Trading and Exchanges ▴ Market Microstructure for Practitioners. Oxford University Press.

- O’Hara, M. (1995). Market Microstructure Theory. Blackwell Publishing.

- Financial Industry Regulatory Authority. (2023). FINRA Rule 5310 ▴ Best Execution and Interpositioning. FINRA.

- European Parliament and the Council of the European Union. (2014). Directive 2014/65/EU on markets in financial instruments (MiFID II). Official Journal of the European Union.

- European Securities and Markets Authority. (2017). Questions and Answers on MiFID II and MiFIR investor protection topics. ESMA.

- U.S. Securities and Exchange Commission. (2022). Proposed Rule ▴ Regulation Best Execution. SEC.

- Lehalle, C. A. & Laruelle, S. (Eds.). (2013). Market Microstructure in Practice. World Scientific Publishing.

- Johnson, B. (2010). Algorithmic Trading and DMA ▴ An introduction to direct access trading strategies. 4Myeloma Press.

![Two spheres balance on a fragmented structure against split dark and light backgrounds. This models institutional digital asset derivatives RFQ protocols, depicting market microstructure, price discovery, and liquidity aggregation](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-price-discovery-liquidity-aggregation.jpg)

## Reflection

The intricate tapestry of best execution regulations, woven with the distinct threads of MiFID II and FINRA, presents a formidable challenge to financial institutions. The divergence in their core philosophies ▴ MiFID II’s emphasis on a holistic, process-driven approach versus FINRA’s focus on demonstrable diligence and post-trade review ▴ forces a critical examination of a firm’s internal systems. The delineation between principal and agency trading further complicates this landscape, demanding a dual-track approach to compliance that is both robust and adaptable. The knowledge gained from this analysis should not be viewed as a mere compliance checklist, but as a strategic imperative.

It prompts a deeper introspection into a firm’s operational DNA. How are your pricing models validated? How is your venue analysis conducted? Is your technology infrastructure capable of not only meeting today’s regulatory demands but also adapting to tomorrow’s?

The pursuit of best execution is not a destination but a continuous journey of refinement. The ultimate goal is to build an operational framework that is not just compliant, but intelligent ▴ a system that transforms regulatory obligation into a source of competitive advantage and client trust.

![Sleek teal and beige forms converge, embodying institutional digital asset derivatives platforms. A central RFQ protocol hub with metallic blades signifies high-fidelity execution and price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-microstructure.jpg)

## Glossary

<a href="https://prime.greeks.live/area/prevailing-market-conditions/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Two semi-transparent, curved elements, one blueish, one greenish, are centrally connected, symbolizing dynamic institutional RFQ protocols. This configuration suggests aggregated liquidity pools and multi-leg spread constructions](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-price-discovery-engine.jpg)

## Prevailing Market Conditions

Meaning ▴ Prevailing Market Conditions refers to the aggregate, real-time state of quantitative and qualitative factors influencing asset valuation and transaction dynamics within a specific market segment, encompassing elements such as liquidity, volatility, order book depth, bid-ask spreads, and relevant macroeconomic indicators. </a><a href="https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A polished, dark blue domed component, symbolizing a private quotation interface, rests on a gleaming silver ring. This represents a robust Prime RFQ framework, enabling high-fidelity execution for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/08/optimized-execution-for-institutional-digital-asset-derivatives-rfq.jpg)

## Best Execution

Meaning ▴ Best Execution is the obligation to obtain the most favorable terms reasonably available for a client's order. </a><a href="https://prime.greeks.live/area/financial-industry-regulatory-authority/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Geometric panels, light and dark, interlocked by a luminous diagonal, depict an institutional RFQ protocol for digital asset derivatives. Central nodes symbolize liquidity aggregation and price discovery within a Principal's execution management system, enabling high-fidelity execution and atomic settlement in market microstructure](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-1.jpg)

## Financial Industry Regulatory Authority

Meaning ▴ The Financial Industry Regulatory Authority, commonly known as FINRA, operates as the largest independent regulator for all securities firms conducting business with the public in the United States. </a><a href="https://prime.greeks.live/area/rule-5310/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An abstract, multi-component digital infrastructure with a central lens and circuit patterns, embodying an Institutional Digital Asset Derivatives platform. This Prime RFQ enables High-Fidelity Execution via RFQ Protocol, optimizing Market Microstructure for Algorithmic Trading, Price Discovery, and Multi-Leg Spread](https://options.greeks.live/wp-content/uploads/2025/08/institutional-grade-digital-asset-derivatives-trading-platform-powering-high-fidelity-execution-via-advanced-rfq-protocol-prime-os-intelligence-layer.jpg)

## Rule 5310

Meaning ▴ Rule 5310 mandates that registered persons provide written notice to their firm regarding any outside business activities, allowing the firm to assess and approve or disapprove such engagements. </a><a href="https://prime.greeks.live/area/agency-trading/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A crystalline sphere, symbolizing atomic settlement for digital asset derivatives, rests on a Prime RFQ platform. Intersecting blue structures depict high-fidelity RFQ execution and multi-leg spread strategies, showcasing optimized market microstructure for capital efficiency and latent liquidity](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-microstructure-8.jpg)

## Agency Trading

Meaning ▴ Agency trading denotes a financial execution model where a broker-dealer acts solely as an agent for a client, facilitating the purchase or sale of securities without committing its own capital or taking a proprietary position in the underlying asset. </a><a href="https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision metallic instrument with a black sphere rests on a multi-layered platform. This symbolizes institutional digital asset derivatives market microstructure, enabling high-fidelity execution and optimal price discovery across diverse liquidity pools](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocol-engine-component-digital-asset-derivatives-market-microstructure.jpg)

## Mifid Ii

Meaning ▴ MiFID II, the Markets in Financial Instruments Directive II, constitutes a comprehensive regulatory framework enacted by the European Union to govern financial markets, investment firms, and trading venues. </a><a href="https://prime.greeks.live/area/best-execution-obligation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A stylized abstract radial design depicts a central RFQ engine processing diverse digital asset derivatives flows. Distinct halves illustrate nuanced market microstructure, optimizing multi-leg spreads and high-fidelity execution, visualizing a Principal's Prime RFQ managing aggregated inquiry and latent liquidity](https://options.greeks.live/wp-content/uploads/2025/07/principal-rfq-execution-engine-optimizing-digital-asset-derivatives-market-microstructure-for-institutional-liquidity-aggregation.jpg)

## Best Execution Obligation

Meaning ▴ The Best Execution Obligation represents a core fiduciary duty requiring financial intermediaries to take all reasonable steps to obtain the most favorable terms available for their clients' orders, considering prevailing market conditions and the specific characteristics of the order. </a><a href="https://prime.greeks.live/area/principal-trade/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Interconnected, precisely engineered modules, resembling Prime RFQ components, illustrate an RFQ protocol for digital asset derivatives. The diagonal conduit signifies atomic settlement within a dark pool environment, ensuring high-fidelity execution and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-protocol-engine.jpg)

## Principal Trade

Meaning ▴ A Principal Trade signifies a transaction where a dealer or market maker executes an order by acting as a direct counterparty, leveraging their own capital and inventory. </a><a href="https://prime.greeks.live/area/otc-derivatives/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precise metallic instrument, resembling an algorithmic trading probe or a multi-leg spread representation, passes through a transparent RFQ protocol gateway. This illustrates high-fidelity execution within market microstructure, facilitating price discovery for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-orchestration-of-institutional-digital-asset-rfq-execution.jpg)

## Otc Derivatives

Meaning ▴ OTC Derivatives are bilateral financial contracts executed directly between two counterparties, outside the regulated environment of a centralized exchange. </a><a href="https://prime.greeks.live/area/principal-trading/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intricate metallic components signify system precision engineering. These structured elements symbolize institutional-grade infrastructure for high-fidelity execution of digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-precision-engineering-for-high-fidelity-execution-and-latency-optimization.jpg)

## Principal Trading

Meaning ▴ Principal Trading defines the operational paradigm where a financial entity engages in market transactions utilizing its own capital and balance sheet, rather than executing orders on behalf of clients. </a><a href="https://prime.greeks.live/question/can-a-broker-fulfill-its-best-execution-obligation-by-solely-routing-to-a-pfof-venue/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A futuristic system component with a split design and intricate central element, embodying advanced RFQ protocols. This visualizes high-fidelity execution, precise price discovery, and granular market microstructure control for institutional digital asset derivatives, optimizing liquidity provision and minimizing slippage](https://options.greeks.live/wp-content/uploads/2025/07/advanced-rfq-protocols-for-digital-asset-derivatives-price-discovery.jpg)

## Execution Obligation

A broker cannot fulfill its best execution duty by solely routing to a PFOF venue; the obligation requires continuous, data-driven comparison against other markets. </a><a href="https://prime.greeks.live/area/liquidity-providers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A spherical Liquidity Pool is bisected by a metallic diagonal bar, symbolizing an RFQ Protocol and its Market Microstructure. Imperfections on the bar represent Slippage challenges in High-Fidelity Execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-optimization-within-principals-market-microstructure-framework.jpg)

## Liquidity Providers

Meaning ▴ Liquidity Providers are market participants, typically institutional entities or sophisticated trading firms, that facilitate efficient market operations by continuously quoting bid and offer prices for financial instruments. </a><a href="https://prime.greeks.live/area/all-sufficient-steps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Sleek, modular system component in beige and dark blue, featuring precise ports and a vibrant teal indicator. This embodies Prime RFQ architecture enabling high-fidelity execution of digital asset derivatives through bilateral RFQ protocols, ensuring low-latency interconnects, private quotation, institutional-grade liquidity, and atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-system-interface-for-digital-asset-derivatives-execution.jpg)

## All Sufficient Steps

Meaning ▴ All Sufficient Steps denotes a design principle and operational mandate within a system where every component or process is engineered to autonomously achieve its defined objective without requiring external intervention or additional inputs beyond its initial parameters. </a><a href="https://prime.greeks.live/area/sufficient-steps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precise mechanical instrument with intersecting transparent and opaque hands, representing the intricate market microstructure of institutional digital asset derivatives. This visual metaphor highlights dynamic price discovery and bid-ask spread dynamics within RFQ protocols, emphasizing high-fidelity execution and latent liquidity through a robust Prime RFQ for atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineering-driving-institutional-digital-asset-derivatives-execution-across-advanced-rfq-protocols-and-prime-brokerage-frameworks.jpg)

## Sufficient Steps

Meaning ▴ Sufficient Steps constitute the minimum, verifiable sequence of operations required to achieve a defined, deterministic outcome within a financial protocol or system, ensuring operational closure and state transition. </a><a href="https://prime.greeks.live/area/reasonable-diligence/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract translucent geometric forms, a central sphere, and intersecting prisms on black. This symbolizes the intricate market microstructure of institutional digital asset derivatives, depicting RFQ protocols for high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-architecture.jpg)

## Reasonable Diligence

Meaning ▴ Reasonable Diligence denotes the systematic and prudent level of investigation and care an institutional participant is expected to undertake to identify, assess, and mitigate risks associated with financial transactions, market participants, and operational processes within the digital asset ecosystem. </a><a href="https://prime.greeks.live/area/price-discovery/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated mechanical system featuring a translucent, crystalline blade-like component, embodying a Prime RFQ for Digital Asset Derivatives. This visualizes high-fidelity execution of RFQ protocols, demonstrating aggregated inquiry and price discovery within market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-system-microstructure-1.jpg)

## Price Discovery

Meaning ▴ Price discovery is the continuous, dynamic process by which the market determines the fair value of an asset through the collective interaction of supply and demand. </a><a href="https://prime.greeks.live/area/execution-quality/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An abstract composition depicts a glowing green vector slicing through a segmented liquidity pool and principal's block. This visualizes high-fidelity execution and price discovery across market microstructure, optimizing RFQ protocols for institutional digital asset derivatives, minimizing slippage and latency](https://options.greeks.live/wp-content/uploads/2025/07/optimal-precise-digital-asset-derivative-rfq-execution-via-smart-protocols-for-institutional-trading.jpg)

## Execution Quality

Meaning ▴ Execution Quality quantifies the efficacy of an order's fill, assessing how closely the achieved trade price aligns with the prevailing market price at submission, alongside consideration for speed, cost, and market impact. </a><a href="https://prime.greeks.live/question/what-are-the-operational-consequences-of-misreporting-under-mifid-ii-versus-a-reporting-failure-under-emir/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![This visual represents an advanced Principal's operational framework for institutional digital asset derivatives. A foundational liquidity pool seamlessly integrates dark pool capabilities for block trades](https://options.greeks.live/wp-content/uploads/2025/07/principal-crypto-derivatives-os-rfq-execution-microstructure.jpg)

## Under Mifid

A MiFID II misreport corrupts market surveillance data; an EMIR failure hides systemic risk, creating distinct operational and reputational threats. </a><a href="https://prime.greeks.live/area/best-execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Interlocking geometric forms, concentric circles, and a sharp diagonal element depict the intricate market microstructure of institutional digital asset derivatives. Concentric shapes symbolize deep liquidity pools and dynamic volatility surfaces](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-and-high-fidelity-execution.jpg)

## Best Execution Policy

Meaning ▴ The Best Execution Policy defines the obligation for a broker-dealer or trading firm to execute client orders on terms most favorable to the client. </a><a href="https://prime.greeks.live/area/agency-trades/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Two abstract, segmented forms intersect, representing dynamic RFQ protocol interactions and price discovery mechanisms. The layered structures symbolize liquidity aggregation across multi-leg spreads within complex market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-microstructure.jpg)

## Agency Trades

Meaning ▴ Agency trades represent an execution paradigm where a broker-dealer acts solely on behalf of a client, executing orders in the market without committing proprietary capital to the trade's principal risk. </a><a href="https://prime.greeks.live/area/finra-rule-5310/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![The abstract metallic sculpture represents an advanced RFQ protocol for institutional digital asset derivatives. Its intersecting planes symbolize high-fidelity execution and price discovery across complex multi-leg spread strategies](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-microstructure-optimization.jpg)

## Finra Rule 5310

Meaning ▴ FINRA Rule 5310 mandates broker-dealers diligently seek the best market for customer orders. </a><a href="https://prime.greeks.live/area/fair-price/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Sleek metallic components with teal luminescence precisely intersect, symbolizing an institutional-grade Prime RFQ. This represents multi-leg spread execution for digital asset derivatives via RFQ protocols, ensuring high-fidelity execution, optimal price discovery, and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-best-execution-system.jpg)

## Fair Price

Meaning ▴ Fair Price represents the theoretical equilibrium valuation of a financial instrument, derived from a robust computational model that integrates real-time market data, order book dynamics, and a comprehensive understanding of underlying asset fundamentals and derivative pricing theory. </a><a href="https://prime.greeks.live/area/market-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A multi-faceted algorithmic execution engine, reflective with teal components, navigates a cratered market microstructure. It embodies a Principal's operational framework for high-fidelity execution of digital asset derivatives, optimizing capital efficiency, best execution via RFQ protocols in a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/advanced-rfq-protocol-engine-for-institutional-digital-asset-derivatives.jpg)

## Market Data

Meaning ▴ Market Data comprises the real-time or historical pricing and trading information for financial instruments, encompassing bid and ask quotes, last trade prices, cumulative volume, and order book depth. </a><a href="https://prime.greeks.live/area/pricing-models/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Teal and dark blue intersecting planes depict RFQ protocol pathways for digital asset derivatives. A large white sphere represents a block trade, a smaller dark sphere a hedging component](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-liquidity.jpg)

## Pricing Models

Meaning ▴ Pricing models are rigorous quantitative frameworks designed to derive the fair value and associated risk parameters of financial instruments, particularly complex derivatives within the institutional digital asset ecosystem. </a><a href="https://prime.greeks.live/area/market-conditions/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central control knob on a metallic platform, bisected by sharp reflective lines, embodies an institutional RFQ protocol. This depicts intricate market microstructure, enabling high-fidelity execution, precise price discovery for multi-leg options, and robust Prime RFQ deployment, optimizing latent liquidity across digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/08/institutional-rfq-digital-asset-derivatives-execution-engine-core-microstructure.jpg)

## Market Conditions

Meaning ▴ Market Conditions denote the aggregate state of variables influencing trading dynamics within a given asset class, encompassing quantifiable metrics such as prevailing liquidity levels, volatility profiles, order book depth, bid-ask spreads, and the directional pressure of order flow. </a><a href="https://prime.greeks.live/question/can-true-anonymity-exist-when-post-trade-settlement-requires-identity-disclosure-to-clearinghouses/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A glowing green ring encircles a dark, reflective sphere, symbolizing a principal's intelligence layer for high-fidelity RFQ execution. It reflects intricate market microstructure, signifying precise algorithmic trading for institutional digital asset derivatives, optimizing price discovery and managing latent liquidity](https://options.greeks.live/wp-content/uploads/2025/07/core-institutional-digital-asset-derivatives-rfq-execution-system-hub.jpg)

## Requires Firms

Anonymity is a temporary, tactical feature of trade execution, systematically relinquished for the structural necessity of risk management. </a><a href="https://prime.greeks.live/area/execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Interconnected, sharp-edged geometric prisms on a dark surface reflect complex light. This embodies the intricate market microstructure of institutional digital asset derivatives, illustrating RFQ protocol aggregation for block trade execution, price discovery, and high-fidelity execution within a Principal's operational framework enabling optimal liquidity](https://options.greeks.live/wp-content/uploads/2025/07/precision-geometric-prisms-reflecting-institutional-digital-asset-derivatives-rfq-price-discovery-and-optimized-execution-market-microstructure.jpg)

## Execution Policy

Meaning ▴ An Execution Policy defines a structured set of rules and computational logic governing the handling and execution of financial orders within a trading system. </a><a href="https://prime.greeks.live/area/smart-order-routing/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intersecting digital architecture with glowing conduits symbolizes Principal's operational framework. An RFQ engine ensures high-fidelity execution of Institutional Digital Asset Derivatives, facilitating block trades, multi-leg spreads](https://options.greeks.live/wp-content/uploads/2025/07/principal-digital-asset-derivatives-rfq-engine-high-fidelity-execution.jpg)

## Smart Order Routing

Meaning ▴ Smart Order Routing is an algorithmic execution mechanism designed to identify and access optimal liquidity across disparate trading venues. </a><a href="https://prime.greeks.live/area/payment-for-order-flow/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central metallic RFQ engine anchors radiating segmented panels, symbolizing diverse liquidity pools and market segments. Varying shades denote distinct execution venues within the complex market microstructure, facilitating price discovery for institutional digital asset derivatives with minimal slippage and latency via high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/principals-digital-asset-derivatives-rfq-protocol-execution-nexus.jpg)

## Payment for Order Flow

Meaning ▴ Payment for Order Flow (PFOF) designates the financial compensation received by a broker-dealer from a market maker or wholesale liquidity provider in exchange for directing client order flow to them for execution. </a><a href="https://prime.greeks.live/area/best-execution-framework/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Dark, reflective planes intersect, outlined by a luminous bar with three apertures. This visualizes RFQ protocols for institutional liquidity aggregation and high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-dynamics.jpg)

## Best Execution Framework

Meaning ▴ The Best Execution Framework defines a structured methodology for achieving the most advantageous outcome for client orders, considering price, cost, speed, likelihood of execution and settlement, order size, and any other relevant considerations. </a><a href="https://prime.greeks.live/area/order-routing/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A translucent blue sphere is precisely centered within beige, dark, and teal channels. This depicts RFQ protocol for digital asset derivatives, enabling high-fidelity execution of a block trade within a controlled market microstructure, ensuring atomic settlement and price discovery on a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/precision-execution-pathway-for-institutional-digital-asset-derivatives-leveraging-rfq-protocols-and-high-fidelity-market-microstructure.jpg)

## Order Routing

Meaning ▴ Order Routing is the automated process by which a trading order is directed from its origination point to a specific execution venue or liquidity source. </a>

**Tags:** [Reasonable Diligence](https://options.greeks.live/area/reasonable-diligence/), [Execution Quality](https://options.greeks.live/area/execution-quality/), [Regular and Rigorous Review](https://options.greeks.live/area/regular-and-rigorous-review/), [Market Microstructure](https://options.greeks.live/area/market-microstructure/), [Execution Policy](https://options.greeks.live/area/execution-policy/), [Pricing Models](https://options.greeks.live/area/pricing-models/)	

## Discover More

- 
### [How Does MiFID II Define the Sufficient Steps for Best Execution?](https://options.greeks.live/question/how-does-mifid-ii-define-the-sufficient-steps-for-best-execution/)
![A sleek, spherical, off-white device with a glowing cyan lens symbolizes an Institutional Grade Prime RFQ Intelligence Layer. It drives High-Fidelity Execution of Digital Asset Derivatives via RFQ Protocols, enabling Optimal Liquidity Aggregation and Price Discovery for Market Microstructure Analysis.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-optimal-execution-1.jpg)

MiFID II defines best execution as a continuous, evidence-based system engineered to demonstrably achieve the optimal client outcome.

- 
### [What Are the Primary Regulatory Differences between the U.S. and Europe for Best Execution?](https://options.greeks.live/question/what-are-the-primary-regulatory-differences-between-the-u-s-and-europe-for-best-execution/)
![A metallic ring, symbolizing a tokenized asset or cryptographic key, rests on a dark, reflective surface with water droplets. This visualizes a Principal's operational framework for High-Fidelity Execution of Institutional Digital Asset Derivatives. It embodies an RFQ Protocol ensuring precise Price Discovery, Atomic Settlement, and optimal Capital Efficiency within a robust Crypto Derivatives OS.](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-institutional-digital-asset-derivatives-rfq-protocol-execution.jpg)

U.S. best execution demands a defensible process of seeking competitive outcomes; Europe mandates a granular, data-driven demonstration of all sufficient steps taken.

- 
### [What Are the Key Differences between FINRA’s Best Execution Rule and the MiFID II Requirements?](https://options.greeks.live/question/what-are-the-key-differences-between-finras-best-execution-rule-and-the-mifid-ii-requirements/)
![A sophisticated system's core component, representing an Execution Management System, drives a precise, luminous RFQ protocol beam. This beam navigates between balanced spheres symbolizing counterparties and intricate market microstructure, facilitating institutional digital asset derivatives trading, optimizing price discovery, and ensuring high-fidelity execution within a prime brokerage framework.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-10.jpg)

FINRA's "reasonable diligence" versus MiFID II's "all sufficient steps" and data-centric transparency.

- 
### [How Do the Best Execution Requirements for Otc Derivatives under Mifid Ii Differ from Those in Other Jurisdictions?](https://options.greeks.live/question/how-do-the-best-execution-requirements-for-otc-derivatives-under-mifid-ii-differ-from-those-in-other-jurisdictions/)
![A transparent sphere, representing a digital asset option, rests on an aqua geometric RFQ execution venue. This proprietary liquidity pool integrates with an opaque institutional grade infrastructure, depicting high-fidelity execution and atomic settlement within a Principal's operational framework for Crypto Derivatives OS.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-system-prime-os.jpg)

MiFID II's data-centric "all sufficient steps" standard for OTC derivatives demands a more robust operational framework than the principles-based "reasonable diligence" approach in the U.S.

- 
### [What Are the Regulatory Requirements for Best Execution When Using RFQ Protocols?](https://options.greeks.live/question/what-are-the-regulatory-requirements-for-best-execution-when-using-rfq-protocols/)
![A sophisticated mechanism features a segmented disc, indicating dynamic market microstructure and liquidity pool partitioning. This system visually represents an RFQ protocol's price discovery process, crucial for high-fidelity execution of institutional digital asset derivatives and managing counterparty risk within a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/advanced-digital-asset-derivatives-rfq-liquidity-aggregation-system.jpg)

Regulatory best execution for RFQs requires a systematic, data-driven process to prove diligent sourcing of the most favorable client outcome.

- 
### [What Are the Core Differences between MiFID II and FINRA Best Execution Rules?](https://options.greeks.live/question/what-are-the-core-differences-between-mifid-ii-and-finra-best-execution-rules/)
![A polished, dark spherical component anchors a sophisticated system architecture, flanked by a precise green data bus. This represents a high-fidelity execution engine, enabling institutional-grade RFQ protocols for digital asset derivatives. It embodies the precision of private quotation and efficient latent liquidity aggregation within market microstructure, crucial for optimal capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-institutional-digital-asset-derivatives-rfq-core.jpg)

MiFID II demands continuous, data-driven proof of optimal outcomes; FINRA requires a defensible process of reasonable diligence.

- 
### [What Are the Regulatory Requirements for Demonstrating Best Execution in Europe and the US?](https://options.greeks.live/question/what-are-the-regulatory-requirements-for-demonstrating-best-execution-in-europe-and-the-us/)
![A spherical, eye-like structure, an Institutional Prime RFQ, projects a sharp, focused beam. This visualizes high-fidelity execution via RFQ protocols for digital asset derivatives, enabling block trades and multi-leg spreads with capital efficiency and best execution across market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-prime-os-rfq-protocol-digital-asset-derivatives-block-trade-execution.jpg)

A firm's best execution capability is a direct reflection of its commitment to client alignment and operational excellence.

- 
### [What Are the Key Differences between FINRA and MiFID II Best Execution Rules?](https://options.greeks.live/question/what-are-the-key-differences-between-finra-and-mifid-ii-best-execution-rules/)
![Prime RFQ visualizes institutional digital asset derivatives RFQ protocol and high-fidelity execution. Glowing liquidity streams converge at intelligent routing nodes, aggregating market microstructure for atomic settlement, mitigating counterparty risk within dark liquidity.](https://options.greeks.live/wp-content/uploads/2025/08/prime-os-high-fidelity-digital-asset-derivatives-rfq-protocol.jpg)

FINRA's "reasonable diligence" and MiFID II's "all sufficient steps" represent two distinct paths to the common goal of best execution.

- 
### [How Can a Firm’s Best Execution Committee Effectively Justify Its Order Routing Decisions to Regulators?](https://options.greeks.live/question/how-can-a-firms-best-execution-committee-effectively-justify-its-order-routing-decisions-to-regulators/)
![A multi-layered, circular device with a central concentric lens. It symbolizes an RFQ engine for precision price discovery and high-fidelity execution. This robust system enables institutional digital asset derivatives trading, reflecting advanced market microstructure, volatility surface analysis, Principal's operational framework, and efficient options trading.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-for-precision-execution.jpg)

A firm's Best Execution Committee justifies routing by architecting a data-driven system where every decision is a defensible output.

---

## Raw Schema Data

```json
{
    "@context": "https://schema.org",
    "@type": "BreadcrumbList",
    "itemListElement": [
        {
            "@type": "ListItem",
            "position": 1,
            "name": "Home",
            "item": "https://options.greeks.live"
        },
        {
            "@type": "ListItem",
            "position": 2,
            "name": "Question",
            "item": "https://options.greeks.live/question/"
        },
        {
            "@type": "ListItem",
            "position": 3,
            "name": "How Do Regulatory Frameworks like MiFID II and FINRA Define Best Execution Differently for Principal versus Agency Trades in OTC Derivatives?",
            "item": "https://options.greeks.live/question/how-do-regulatory-frameworks-like-mifid-ii-and-finra-define-best-execution-differently-for-principal-versus-agency-trades-in-otc-derivatives/"
        }
    ]
}
```

```json
{
    "@context": "https://schema.org",
    "@type": "Organization",
    "@id": "https://greeks.live/#organization",
    "name": "Greeks.Live",
    "url": "https://greeks.live/",
    "description": "Greeks.live is the definitive toolkit for the professional options trader, dedicated to empowering our users with institutional-grade data, advanced analytics, and a comprehensive suite of trading tools designed to provide a decisive edge in the market. Every article and guide published under the Greeks.live name is a product of our deep commitment to data-driven analysis and our mission to support the global trading community.",
    "email": "support@greeks.live",
    "logo": {
        "@type": "ImageObject",
        "url": "https://options.greeks.live/wp-content/uploads/2025/07/Greeks.Live-Logo-Icon.svg"
    },
    "hasPart": [
        {
            "@type": "WebSite",
            "name": "About Us",
            "url": "https://about.greeks.live"
        },
        {
            "@type": "WebSite",
            "name": "App Download Page",
            "url": "https://about.greeks.live/#/download/basic_trade"
        },
        {
            "@type": "WebSite",
            "name": "Newcomers' Guide",
            "url": "https://twisty-sign-c8b.notion.site/Guide-for-Greeks-live-X-Deribit-Newbies-5a08a3052822427d800af6eaf3704c8d"
        },
        {
            "@type": "WebSite",
            "name": "Knowledge Base",
            "url": "https://linktr.ee/greeks.live"
        },
        {
            "@type": "WebSite",
            "name": "Option Terminology",
            "url": "https://greekslive.notion.site/88dfc00e7c584d4d8969b6302a79a12f?pvs=4"
        },
        {
            "@type": "WebSite",
            "name": "Terms of Service",
            "url": "https://greeks.live/#/tos"
        },
        {
            "@type": "WebSite",
            "name": "Disclaimer",
            "url": "https://greeks.live/#/disclaimer"
        }
    ],
    "sameAs": [
        "https://x.com/greekslive",
        "https://youtube.com/@greeks_live?si=-KjT0Lkw4WUCI0tD",
        "https://t.me/greekslive_notifications",
        "https://t.me/greekslive",
        "https://pinterest.com/greekslive/"
    ],
    "makesOffer": [
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "RFQ Platform",
                "url": "https://rfq.greeks.live",
                "description": "Execute institutional-grade block trades for crypto options and futures. This platform provides deep, over-the-counter (OTC) liquidity via a professional Request for Quote system.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Lending Tools",
                "url": "https://lend.greeks.live",
                "description": "Manage crypto lending and borrowing activities to earn yield or secure loans. This suite of tools helps users analyze interest rates and manage collateralized debt positions.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Data Lab",
                "url": "https://greeks.live/#/deribit/tools/datalab/BTC",
                "description": "Analyze historical and real-time options data with advanced metrics. This tool is designed for backtesting strategies and identifying market trends through comprehensive data visualization.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Profit & Loss Analysis (PnL)",
                "url": "https://greeks.live/#/deribit/tools/pnl_analysis",
                "description": "Track and analyze the Profit and Loss (PnL) of your options portfolio. This tool provides detailed performance metrics to help traders evaluate and refine their strategies.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Position Visualization",
                "url": "https://greeks.live/#/deribit/tools/pv/BTC",
                "description": "Visualize complex options positions and their corresponding risk profiles. This tool generates payoff diagrams to help traders intuitively understand potential profit, loss, and exposure.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Options Calculator",
                "url": "https://greeks.live/#/deribit/tools/calculator",
                "description": "Calculate the theoretical price and risk parameters ('the Greeks') of crypto options. An essential tool for pricing new trades and analyzing the sensitivity of existing positions.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Greeks.live Main Platform",
                "url": "https://greeks.live/",
                "description": "The central hub for the Greeks.live suite of professional cryptocurrency options and derivatives trading tools. Access analytics, manage positions, and explore the ecosystem.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Community Forum",
                "url": "https://t.greeks.live",
                "description": "Join the official Greeks.live community. Connect with other traders, share insights, and receive the latest updates directly from the team.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Greeks.live for Deribit",
                "url": "http://deribit.greeks.live",
                "description": "A dedicated interface for trading on the Deribit exchange. This platform leverages Greeks.live's advanced analytics and tools specifically for users of Deribit's options and futures markets.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Greeks.live for OKX",
                "url": "http://okx.greeks.live",
                "description": "A dedicated interface for trading on the OKX exchange. This platform integrates Greeks.live's powerful analytics with the OKX marketplace, focusing on its options and derivatives products.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "GLVS.AI Trading Platform",
                "url": "https://www.glvs.ai/",
                "description": "An AI-powered platform for automated crypto options trading. Leverage advanced algorithms and data-driven signals to develop and deploy sophisticated, hands-free trading strategies.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "API Testnet & Sandbox",
                "url": "https://test.greeks.live",
                "description": "A dedicated testnet environment for developers to test their API integrations and automated trading strategies. This sandbox allows for full functionality testing without risking real funds.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        }
    ],
    "subOrganization": [
        {
            "@type": "Organization",
            "name": "GreeksLive HK Co., Limited",
            "email": "support@greeks.live",
            "telephone": "+852-56418949",
            "address": {
                "@type": "PostalAddress",
                "streetAddress": "Unit 11, 27/F, K. Wah Centre, 191 Java Road",
                "addressLocality": "Hong Kong",
                "addressRegion": "North Point",
                "addressCountry": "CN",
                "postalCode": "0000"
            },
            "geo": {
                "@type": "GeoCoordinates",
                "latitude": "22.2932357",
                "longitude": "114.2022026"
            },
            "image": "https://options.greeks.live/wp-content/uploads/2025/08/Wah-Centre-Hong-Kong.jpg"
        }
    ]
}
```

```json
{
    "@context": "https://schema.org",
    "@type": "Article",
    "mainEntityOfPage": {
        "@type": "WebPage",
        "@id": "https://options.greeks.live/question/how-do-regulatory-frameworks-like-mifid-ii-and-finra-define-best-execution-differently-for-principal-versus-agency-trades-in-otc-derivatives/"
    },
    "headline": "How Do Regulatory Frameworks like MiFID II and FINRA Define Best Execution Differently for Principal versus Agency Trades in OTC Derivatives? \u25b4 Question",
    "description": "MiFID II and FINRA define best execution differently, with MiFID II focusing on \"all sufficient steps\" and a fair process, while FINRA emphasizes \"reasonable diligence\" and a rigorous review of outcomes. \u25b4 Question",
    "url": "https://options.greeks.live/question/how-do-regulatory-frameworks-like-mifid-ii-and-finra-define-best-execution-differently-for-principal-versus-agency-trades-in-otc-derivatives/",
    "datePublished": "2025-08-07T10:34:16+00:00",
    "dateModified": "2025-08-07T10:34:31+00:00",
    "articleSection": [
        "Question"
    ],
    "author": {
        "@id": "https://greeks.live/#organization"
    },
    "publisher": {
        "@id": "https://greeks.live/#organization"
    },
    "image": {
        "@type": "ImageObject",
        "url": "https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-1.jpg",
        "caption": "Overlapping panels and luminous lines represent the market microstructure of institutional digital asset derivatives trading. This illustrates a Principal's RFQ protocol system, showcasing private quotation and liquidity aggregation for multi-leg spreads. It signifies a robust execution management system enabling high-fidelity execution and atomic settlement. The design emphasizes capital efficiency and systemic integrity within a Prime RFQ."
    },
    "keywords": [
        "Agency Trades",
        "Agency Trading",
        "All Sufficient Steps",
        "Best Execution",
        "Best Execution Framework",
        "Best Execution Obligation",
        "Best Execution Policy",
        "Execution Policy",
        "Execution Quality",
        "Fair Price",
        "Financial Industry Regulatory Authority",
        "Financial Regulation",
        "FINRA Rule 5310",
        "Liquidity Providers",
        "Market Conditions",
        "Market Data",
        "Market Microstructure",
        "MiFID II",
        "Order Routing",
        "OTC Derivatives",
        "Payment for Order Flow",
        "Prevailing Market Conditions",
        "Price Discovery",
        "Pricing Models",
        "Principal Trade",
        "Principal Trading",
        "Reasonable Diligence",
        "Regular and Rigorous Review",
        "Regulatory Compliance",
        "Rule 5310",
        "Smart Order Routing",
        "Sufficient Steps",
        "Transaction Cost Analysis"
    ]
}
```

```json
{
    "@context": "https://schema.org",
    "@type": "WebSite",
    "url": "https://options.greeks.live/",
    "potentialAction": {
        "@type": "SearchAction",
        "target": "https://options.greeks.live/?s=search_term_string",
        "query-input": "required name=search_term_string"
    }
}
```


---

**Original URL:** https://options.greeks.live/question/how-do-regulatory-frameworks-like-mifid-ii-and-finra-define-best-execution-differently-for-principal-versus-agency-trades-in-otc-derivatives/
