# How Do Regulatory Frameworks like MiFID II Define Best Execution for Assets Traded Over-The-Counter? ▴ Question

**Published:** 2025-08-09
**Categories:** Question

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## Concept

The Markets in Financial Instruments Directive II (MiFID II) establishes a comprehensive framework for best execution, extending its reach to the often opaque world of [over-the-counter](https://prime.greeks.live/area/over-the-counter/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (OTC) derivatives. The directive moves beyond a simplistic view of best price, mandating that investment firms take “[all sufficient steps](https://prime.greeks.live/area/all-sufficient-steps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” to achieve the best possible result for their clients. This obligation is not a passive check-box exercise; it is an active, demonstrable process that requires a fundamental rethinking of how firms approach order execution, particularly for complex, customized OTC products.

The core of the [MiFID II](https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) requirement for OTC assets is a shift from a “reasonable steps” to an “all [sufficient steps](https://prime.greeks.live/area/sufficient-steps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” standard, a seemingly subtle change in language that carries significant operational weight. This enhanced standard necessitates a more rigorous and evidence-based approach to execution, compelling firms to build a robust and auditable trail of their decision-making process.

![Precision cross-section of an institutional digital asset derivatives system, revealing intricate market microstructure. Toroidal halves represent interconnected liquidity pools, centrally driven by an RFQ protocol](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-architecture-revealing-precision-rfq-protocol-engine-for-optimal-high-fidelity-execution-and-latent-liquidity-aggregation.jpg)

## Deconstructing the Mandate for Over-The-Counter Instruments

For [OTC](https://prime.greeks.live/area/otc/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) instruments, which lack the centralized pricing and transparency of exchange-traded products, MiFID II introduces a specific requirement to check the fairness of the price. This involves gathering market data to estimate the product’s price and, where feasible, comparing it with similar or comparable products. This presents a considerable challenge in the OTC space, where products are often bespoke and lack direct comparables.

The directive recognizes this complexity and allows for a more nuanced assessment of [best execution](https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) for professional clients, where factors beyond price, such as speed, likelihood of execution, and settlement, can be given greater weight. However, for retail clients, the “total consideration,” encompassing both the price and all associated costs, remains the paramount factor.

![A central translucent disk, representing a Liquidity Pool or RFQ Hub, is intersected by a precision Execution Engine bar. Its core, an Intelligence Layer, signifies dynamic Price Discovery and Algorithmic Trading logic for Digital Asset Derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-visualizing-microstructure.jpg)

## The Role of Execution Factors

MiFID II explicitly outlines a set of execution factors that firms must consider when striving for the best possible result for their clients. These factors provide a structured framework for evaluating the quality of execution and are particularly crucial in the context of OTC assets where a singular focus on price can be misleading. The directive mandates that firms establish an [order execution policy](https://prime.greeks.live/area/order-execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) that details, for each class of [financial instrument](https://prime.greeks.live/area/financial-instrument/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), the relative importance of these factors and the different venues or counterparties used for execution.

> The directive compels firms to move beyond a passive acceptance of quoted prices and to actively demonstrate the fairness and quality of their OTC execution.

The [execution factors](https://prime.greeks.live/area/execution-factors/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) that must be taken into account include:

- **Price** ▴ The price of the financial instrument.

- **Costs** ▴ All expenses incurred by the client that are directly related to the execution of the order, including execution venue fees, clearing and settlement fees, and any other fees paid to third parties involved in the execution of the order.

- **Speed** ▴ The elapsed time between the receipt of an order and its execution.

- **Likelihood of execution and settlement** ▴ The probability that the order will be successfully executed and settled.

- **Size and nature of the order** ▴ The specific characteristics of the order, which can influence the choice of execution strategy and venue.

- **Any other consideration relevant to the execution of the order** ▴ A catch-all category that allows firms to consider other factors that may be important in specific circumstances.

The relative importance of these factors is not fixed and depends on the specific characteristics of the client, the order, the financial instrument, and the [execution venues](https://prime.greeks.live/area/execution-venues/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) under consideration. For a large, illiquid OTC derivative trade, for example, the likelihood of execution and minimizing market impact might take precedence over achieving the absolute best price at a single point in time.

![Intersecting translucent aqua blades, etched with algorithmic logic, symbolize multi-leg spread strategies and high-fidelity execution. Positioned over a reflective disk representing a deep liquidity pool, this illustrates advanced RFQ protocols driving precise price discovery within institutional digital asset derivatives market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-optimized-algorithmic-execution-microstructure-for-price-discovery.jpg)

![A precision optical system with a reflective lens embodies the Prime RFQ intelligence layer. Gray and green planes represent divergent RFQ protocols or multi-leg spread strategies for institutional digital asset derivatives, enabling high-fidelity execution and optimal price discovery within complex market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-intelligent-core-driving-digital-asset-derivatives-rfq-protocols-high-fidelity-execution-across-diverse-liquidity-pools-for-optimal-price-discovery.jpg)

## Strategy

A strategic response to MiFID II’s best execution requirements for OTC assets transcends mere compliance. It involves architecting an operational framework that embeds the principles of best execution into the very fabric of the firm’s trading processes. This requires a proactive and data-driven approach to managing the entire lifecycle of an OTC trade, from pre-trade analysis to post-trade reporting and review.

The elevation of the best execution standard to “all sufficient steps” necessitates a forward-looking strategy that anticipates regulatory scrutiny and leverages the requirements as a catalyst for competitive differentiation. A firm’s ability to demonstrate a systematic and evidence-based approach to OTC execution can become a significant factor in attracting and retaining sophisticated 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)

## Building a Defensible Execution Policy

The cornerstone of a [MiFID II-compliant](https://prime.greeks.live/question/what-are-the-core-technological-challenges-in-automating-mifid-ii-compliant-partial-fill-reporting/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) strategy for OTC best execution is a robust and detailed order execution policy. This document is more than a high-level statement of intent; it is a granular and client-facing articulation of the firm’s [execution arrangements](https://prime.greeks.live/area/execution-arrangements/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The policy must be customized for each class of financial instrument, reflecting the unique characteristics and market structures of different OTC products.

For instance, the execution strategy for a plain vanilla interest rate swap will differ significantly from that for a complex, multi-leg structured product. The policy must clearly explain how the firm will execute client orders and the factors that will be considered in selecting execution venues or counterparties.

![A precision-engineered, multi-layered mechanism symbolizing a robust RFQ protocol engine for institutional digital asset derivatives. Its components represent aggregated liquidity, atomic settlement, and high-fidelity execution within a sophisticated market microstructure, enabling efficient price discovery and optimal capital efficiency for block trades](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-engine.jpg)

## Venue Selection and Counterparty Management

A critical component of the [execution policy](https://prime.greeks.live/area/execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is the process for selecting and managing execution venues and counterparties. For OTC trades, this involves a comprehensive due diligence process to assess the capabilities and [execution quality](https://prime.greeks.live/area/execution-quality/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) of potential counterparties. This goes beyond simply comparing quotes; it requires an evaluation of a counterparty’s financial stability, operational efficiency, and willingness to provide transparent pricing and post-trade data.

Firms must be able to justify their choice of counterparties and demonstrate that they are consistently providing high-quality execution. This necessitates a continuous monitoring process, informed by both quantitative data and qualitative assessments.

The following table outlines key considerations for counterparty selection in the context of OTC best execution:

| Consideration | Description | Relevance to Best Execution |
| --- | --- | --- |
| Pricing Transparency | The willingness and ability of the counterparty to provide clear and detailed pricing information, including any mark-ups or fees. | Essential for demonstrating the fairness of the price, a key requirement under MiFID II. |
| Execution Speed and Certainty | The counterparty’s track record in executing trades quickly and reliably, particularly in volatile market conditions. | Crucial for minimizing slippage and ensuring that the client’s order is executed at the desired level. |
| Post-Trade Data Provision | The counterparty’s ability to provide timely and accurate post-trade data, including execution timestamps and other relevant details. | Necessary for conducting meaningful post-trade analysis and demonstrating compliance with reporting requirements. |
| Operational Efficiency | The efficiency and reliability of the counterparty’s back-office and settlement processes. | Reduces the risk of settlement failures and other operational issues that can negatively impact the client. |

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## The Imperative of Data and Analytics

A data-driven approach is fundamental to a successful MiFID II strategy for OTC best execution. Firms must invest in the necessary technology and infrastructure to capture, store, and analyze a wide range of pre-trade and [post-trade data](https://prime.greeks.live/area/post-trade-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This data is essential for both demonstrating compliance and for continuously improving execution quality.

Pre-trade analytics can help traders to identify the most suitable counterparties and execution strategies for a given order, while post-trade analysis provides valuable insights into the effectiveness of those choices. [Transaction Cost Analysis](https://prime.greeks.live/area/transaction-cost-analysis/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) ([TCA](https://prime.greeks.live/area/tca/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)) is a particularly powerful tool for evaluating execution performance, allowing firms to compare the actual execution price against a variety of benchmarks.

> The strategic implementation of a robust best execution framework can transform a regulatory obligation into a source of competitive advantage.

The following list outlines the key data points that firms should be capturing and analyzing for OTC trades:

- **Pre-trade data** ▴ This includes indicative quotes from multiple counterparties, market data for comparable products, and any other information used to assess the fairness of the price.

- **Execution data** ▴ This includes the exact time of execution, the execution price, the size of the trade, and the identity of the counterparty.

- **Post-trade data** ▴ This includes settlement data, clearing data, and any other information related to the post-trade lifecycle of the transaction.

![An abstract visualization of a sophisticated institutional digital asset derivatives trading system. Intersecting transparent layers depict dynamic market microstructure, high-fidelity execution pathways, and liquidity aggregation for RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-institutional-digital-asset-derivatives-rfq-execution.jpg)

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## Execution

The execution of a MiFID II-compliant [best execution framework](https://prime.greeks.live/area/best-execution-framework/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) for OTC assets is a multifaceted undertaking that requires a combination of robust governance, advanced technology, and a culture of continuous improvement. It is at the execution level that the strategic principles outlined in the firm’s [order execution](https://prime.greeks.live/area/order-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) policy are translated into tangible actions and auditable evidence. The “all sufficient steps” standard demands a level of operational rigor that permeates every stage of the trading process, from the initial receipt of a client order to the final settlement of the transaction. This requires a clear allocation of responsibilities, with front-office traders, compliance personnel, and technology teams all playing a crucial role in ensuring that the firm’s best execution obligations are met.

![Abstract clear and teal geometric forms, including a central lens, intersect a reflective metallic surface on black. This embodies market microstructure precision, algorithmic trading for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-prime-os.jpg)

## Operationalizing the Order Execution Policy

The order execution policy serves as the blueprint for the firm’s best execution arrangements, and its operationalization is a critical first step in the execution process. This involves embedding the policy’s principles and procedures into the firm’s day-to-day workflows. For example, the firm’s order management system (OMS) should be configured to capture all the necessary data points for each OTC trade, including the rationale for the choice of execution venue or counterparty.

The OMS should also be able to generate reports that allow for the systematic monitoring of execution quality. This requires a close collaboration between the trading desk and the technology team to ensure that the firm’s systems are fit for purpose.

![A sleek, metallic, X-shaped object with a central circular core floats above mountains at dusk. It signifies an institutional-grade Prime RFQ for digital asset derivatives, enabling high-fidelity execution via RFQ protocols, optimizing price discovery and capital efficiency across dark pools for best execution](https://options.greeks.live/wp-content/uploads/2025/07/advanced-principal-rfq-protocol-architecture-for-institutional-digital-asset-derivatives-optimal-price-discovery-and-execution.jpg)

## Pre-Trade Price Fairness Assessment

A key operational challenge in the OTC space is the requirement to assess the fairness of the price before executing a trade. This is particularly difficult for illiquid or bespoke products where there may be no readily available market data. In such cases, firms must develop a clear and consistent methodology for estimating the [fair value](https://prime.greeks.live/area/fair-value/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) of the instrument. This may involve using a variety of inputs, including pricing models, data from similar products, and quotes from multiple counterparties.

The methodology should be documented in the firm’s order execution policy and applied consistently across all relevant trades. The ability to demonstrate a robust and transparent [price fairness assessment](https://prime.greeks.live/question/how-does-the-anonymity-of-dark-pools-impact-overall-market-price-discovery-and-fairness/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) process is a critical element of a defensible best [execution framework](https://prime.greeks.live/area/execution-framework/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

The following table provides a hypothetical example of a [pre-trade price fairness assessment](https://prime.greeks.live/question/how-does-pre-trade-risk-assessment-differ-between-liquid-and-illiquid-asset-classes/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) for an OTC derivative:

| Assessment Factor | Methodology | Outcome |
| --- | --- | --- |
| Internal Model Price | The firm’s proprietary pricing model is used to generate a fair value estimate based on current market inputs. | The model generates a fair value of 100.50. |
| Comparable Product Analysis | The prices of similar, more liquid products are analyzed to derive an implied price for the OTC derivative. | The analysis suggests a fair value in the range of 100.40 to 100.60. |
| Counterparty Quote Comparison | Quotes are requested from three different counterparties. | The quotes received are 100.45, 100.55, and 100.65. |
| Conclusion | The proposed execution price of 100.52 is deemed to be fair, as it falls within the range of the comparable product analysis and is in line with the quotes received from other counterparties. | The trade is executed at 100.52. |

![Robust polygonal structures depict foundational institutional liquidity pools and market microstructure. Transparent, intersecting planes symbolize high-fidelity execution pathways for multi-leg spread strategies and atomic settlement, facilitating private quotation via RFQ protocols within a controlled dark pool environment, ensuring optimal price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-microstructure-prime-os.jpg)

## Monitoring and Reporting

The execution of a MiFID II-compliant best execution framework does not end with the execution of the trade. Firms are required to monitor the effectiveness of their execution arrangements on an ongoing basis and to make changes where necessary. This involves a regular review of execution quality, taking into account the data published by execution venues and other MiFID firms.

Firms are also required to publish an annual report detailing their top five execution venues for each class of financial instrument and a summary of the execution quality obtained. This report, known as the [RTS 28](https://prime.greeks.live/area/rts-28/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) report, is a key transparency measure that allows clients and regulators to assess the firm’s execution performance.

> The granular reporting requirements of MiFID II provide a powerful incentive for firms to continuously optimize their execution arrangements.

The monitoring and reporting process should be supported by a robust data infrastructure that allows for the efficient collection and analysis of the required information. This may involve the use of specialized software tools for TCA and other forms of execution quality analysis. The insights gained from this analysis should be used to inform a continuous feedback loop, with the results of the monitoring process being used to refine the firm’s order execution policy and to make improvements to its execution arrangements.

The following list outlines the key steps in the monitoring and reporting process:

- **Data Collection** ▴ The firm must collect all the necessary data for each OTC trade, including pre-trade, execution, and post-trade data.

- **Data Analysis** ▴ The collected data must be analyzed to assess execution quality, using a variety of metrics and benchmarks.

- **Reporting** ▴ The firm must produce the required reports, including the annual RTS 28 report, and make them available to clients and regulators.

- **Review and Remediation** ▴ The firm must regularly review the results of its monitoring process and take action to address any identified deficiencies.

![A sleek, multi-layered device, possibly a control knob, with cream, navy, and metallic accents, against a dark background. This represents a Prime RFQ interface for Institutional Digital Asset Derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-control-interface-for-institutional-digital-asset-derivatives-rfq-protocols-and-prime-os.jpg)

## References

- Dechert LLP. “MiFID II ▴ Best execution.” 2017.

- Financial Conduct Authority. “MiFID II Best Execution.” 2018.

- Hogan Lovells. “Achieving best execution under MiFID II.” 2017.

- Kennedy, Tom. “Best Execution Under MiFID II.” Thomson Reuters, 2017.

- Financial Conduct Authority. “COBS 11.2A Best execution ▴ MiFID provisions.” FCA Handbook.

- European Securities and Markets Authority. “Questions and Answers on MiFID II and MiFIR investor protection and intermediaries topics.” 2017.

- International Swaps and Derivatives Association. “ISDA MiFID II Implementation.” 2018.

- PricewaterhouseCoopers. “MiFID II ▴ A new world for investment firms.” 2017.

![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)

## Reflection

The integration of a MiFID II-compliant best execution framework for over-the-counter assets represents a significant operational undertaking. The principles and procedures discussed herein provide a roadmap for navigating the complexities of this regulatory landscape. The ultimate success of any such framework, however, hinges on a firm’s ability to cultivate a culture of continuous improvement, where the pursuit of best execution is not simply a matter of compliance, but a core component of the firm’s value proposition.

The journey towards a truly optimized execution process is an iterative one, requiring a constant dialogue between the front office, compliance, and technology. As markets evolve and new technologies emerge, so too must the firm’s approach to best execution, ensuring that it remains at the forefront of industry best practice.

![Abstract composition features two intersecting, sharp-edged planes—one dark, one light—representing distinct liquidity pools or multi-leg spreads. Translucent spherical elements, symbolizing digital asset derivatives and price discovery, balance on this intersection, reflecting complex market microstructure and optimal RFQ protocol execution](https://options.greeks.live/wp-content/uploads/2025/07/precision-digital-asset-derivatives-rfq-execution-market-microstructure.jpg)

## Glossary

<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">
![Clear sphere, precise metallic probe, reflective platform, blue internal light. This symbolizes RFQ protocol for high-fidelity execution of digital asset derivatives, optimizing price discovery within market microstructure, leveraging dark liquidity for atomic settlement and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-precision-execution-1.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/over-the-counter/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek blue and white mechanism with a focused lens symbolizes Pre-Trade Analytics for Digital Asset Derivatives. A glowing turquoise sphere represents a Block Trade within a Liquidity Pool, demonstrating High-Fidelity Execution via RFQ protocol for Price Discovery in Dark Pool Market Microstructure](https://options.greeks.live/wp-content/uploads/2025/07/advanced-institutional-digital-asset-derivatives-rfq-execution-system-for-optimal-price-discovery-and-high-fidelity-execution.jpg)

## Over-The-Counter

Meaning ▴ Over-the-Counter refers to a decentralized market where financial instruments are traded directly between two parties, bypassing a centralized exchange or public order book. </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">
![An Execution Management System module, with intelligence layer, integrates with a liquidity pool hub and RFQ protocol component. This signifies atomic settlement and high-fidelity execution within an institutional grade Prime RFQ, ensuring capital efficiency for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/08/prime-os-orchestrating-institutional-digital-asset-derivatives-rfq-protocols-for-optimal-execution.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/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Two sharp, intersecting blades, one white, one blue, represent precise RFQ protocols and high-fidelity execution within complex market microstructure. Behind them, translucent wavy forms signify dynamic liquidity pools, multi-leg spreads, and volatility surfaces](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-optimized-liquidity-aggregation-principal-prime-os-intelligence-layer.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/otc/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Two sleek, pointed objects intersect centrally, forming an 'X' against a dual-tone black and teal background. This embodies the high-fidelity execution of institutional digital asset derivatives via RFQ protocols, facilitating optimal price discovery and efficient cross-asset trading within a robust Prime RFQ, minimizing slippage and adverse selection](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-prime-os-microstructure.jpg)

## Otc

Meaning ▴ OTC, or Over-the-Counter, designates direct, bilateral transactions between two parties that occur outside the formal structure of a centralized exchange. </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 dark, reflective surface showcases a metallic bar, symbolizing market microstructure and RFQ protocol precision for block trade execution. A clear sphere, representing atomic settlement or implied volatility, rests upon it, set against a teal liquidity pool](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-high-fidelity-execution-4.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/order-execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated dark-hued institutional-grade digital asset derivatives platform interface, featuring a glowing aperture symbolizing active RFQ price discovery and high-fidelity execution. The integrated intelligence layer facilitates atomic settlement and multi-leg spread processing, optimizing market microstructure for prime brokerage operations and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-crypto-derivatives-rfq-engine-intelligence-layer.jpg)

## Order Execution Policy

Meaning ▴ An Order Execution Policy defines the systematic procedures and criteria governing how an institutional trading desk processes and routes client or proprietary orders across various liquidity venues. </a><a href="https://prime.greeks.live/area/financial-instrument/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A textured spherical digital asset, resembling a lunar body with a central glowing aperture, is bisected by two intersecting, planar liquidity streams. This depicts institutional RFQ protocol, optimizing block trade execution, price discovery, and multi-leg options strategies with high-fidelity execution within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-optimized-rfq-execution-protocol-dynamic-liquidity-management.jpg)

## Financial Instrument

Meaning ▴ A Financial Instrument represents a contractual agreement possessing inherent value, enabling the transfer of economic value or risk between parties. </a><a href="https://prime.greeks.live/area/execution-factors/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract forms depict a liquidity pool and Prime RFQ infrastructure. A reflective teal private quotation, symbolizing Digital Asset Derivatives like Bitcoin Options, signifies high-fidelity execution via RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-microstructure-intelligence-layer.jpg)

## Execution Factors

Meaning ▴ Execution Factors are the quantifiable, dynamic variables that directly influence the outcome and quality of a trade execution within institutional digital asset markets. </a><a href="https://prime.greeks.live/area/execution-venues/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central, metallic, multi-bladed mechanism, symbolizing a core execution engine or RFQ hub, emits luminous teal data streams. These streams traverse through fragmented, transparent structures, representing dynamic market microstructure, high-fidelity price discovery, and liquidity aggregation](https://options.greeks.live/wp-content/uploads/2025/07/principal-grade-digital-asset-derivatives-rfq-protocol-engine-facilitating-high-fidelity-execution-and-optimal-price-discovery-across-fragmented-market-microstructure.jpg)

## Execution Venues

Meaning ▴ Execution Venues are regulated marketplaces or bilateral platforms where financial instruments are traded and orders are matched, encompassing exchanges, multilateral trading facilities, organized trading facilities, and over-the-counter desks. </a><a href="https://prime.greeks.live/area/execution-arrangements/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central glowing core within metallic structures symbolizes an Institutional Grade RFQ engine. This Intelligence Layer enables optimal Price Discovery and High-Fidelity Execution for Digital Asset Derivatives, streamlining Block Trade and Multi-Leg Spread Atomic Settlement](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-microstructure-core.jpg)

## Execution Arrangements

Meaning ▴ Execution Arrangements denote the comprehensive, pre-defined framework and operational parameters that govern the entire lifecycle of a trade order within institutional digital asset derivatives. </a><a href="https://prime.greeks.live/question/what-are-the-core-technological-challenges-in-automating-mifid-ii-compliant-partial-fill-reporting/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Two intersecting stylized instruments over a central blue sphere, divided by diagonal planes. This visualizes sophisticated RFQ protocols for institutional digital asset derivatives, optimizing price discovery and managing counterparty risk](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-high-fidelity-execution-2.jpg)

## Mifid Ii-Compliant

Automating MiFID II partial fill reporting requires a systemic shift to a fill-centric, event-driven architecture to manage data granularity. </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">
![A central core represents a Prime RFQ engine, facilitating high-fidelity execution. Transparent, layered structures denote aggregated liquidity pools and multi-leg spread strategies](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-engine-for-institutional-digital-asset-derivatives-execution.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/area/execution-policy/?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 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/post-trade-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract geometric forms depict multi-leg spread execution via advanced RFQ protocols. Intersecting blades symbolize aggregated liquidity from diverse market makers, enabling optimal price discovery and high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-multi-leg-rfq-execution-orchestration.jpg)

## Post-Trade Data

Meaning ▴ Post-Trade Data comprises all information generated subsequent to the execution of a trade, encompassing confirmation, allocation, clearing, and settlement details. </a><a href="https://prime.greeks.live/area/transaction-cost-analysis/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intersecting opaque and luminous teal structures symbolize converging RFQ protocols for multi-leg spread execution. Surface droplets denote market microstructure granularity and slippage](https://options.greeks.live/wp-content/uploads/2025/07/rfq-protocols-for-digital-asset-derivatives-high-fidelity-execution.jpg)

## Transaction Cost Analysis

Meaning ▴ Transaction Cost Analysis (TCA) is the quantitative methodology for assessing the explicit and implicit costs incurred during the execution of financial trades. </a><a href="https://prime.greeks.live/area/tca/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, institutional-grade Crypto Derivatives OS with an integrated intelligence layer supports a precise RFQ protocol. Two balanced spheres represent principal liquidity units undergoing high-fidelity execution, optimizing capital efficiency within market microstructure for best execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-platform-3.jpg)

## Tca

Meaning ▴ Transaction Cost Analysis (TCA) represents a quantitative methodology designed to evaluate the explicit and implicit costs incurred during the execution of financial trades. </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">
![A refined object featuring a translucent teal element, symbolizing a dynamic RFQ for Institutional Grade Digital Asset Derivatives. Its precision embodies High-Fidelity Execution and seamless Price Discovery within complex Market Microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-precision-for-optimal-execution-and-deep-liquidity-aggregation.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-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, bi-component digital asset derivatives engine reveals its intricate core, symbolizing an advanced RFQ protocol. This Prime RFQ component enables high-fidelity execution and optimal price discovery within complex market microstructure, managing latent liquidity for institutional operations](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-optimal-execution.jpg)

## Order Execution

Meaning ▴ Order Execution defines the precise operational sequence that transforms a Principal's trading intent into a definitive, completed transaction within a digital asset market. </a><a href="https://prime.greeks.live/area/fair-value/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Translucent geometric planes, speckled with micro-droplets, converge at a central nexus, emitting precise illuminated lines. This embodies Institutional Digital Asset Derivatives Market Microstructure, detailing RFQ protocol efficiency, High-Fidelity Execution pathways, and granular Atomic Settlement within a transparent Liquidity Pool](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-protocol-market-microstructure.jpg)

## Fair Value

Meaning ▴ Fair Value represents the theoretical price of an asset, derivative, or portfolio component, meticulously derived from a robust quantitative model, reflecting the true economic equilibrium in the absence of transient market noise. </a><a href="https://prime.greeks.live/question/how-does-the-anonymity-of-dark-pools-impact-overall-market-price-discovery-and-fairness/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Two high-gloss, white cylindrical execution channels with dark, circular apertures and secure bolted flanges, representing robust institutional-grade infrastructure for digital asset derivatives. These conduits facilitate precise RFQ protocols, ensuring optimal liquidity aggregation and high-fidelity execution within a proprietary Prime RFQ environment](https://options.greeks.live/wp-content/uploads/2025/08/institutional-grade-execution-channels-enabling-private-quotation-and-optimal-liquidity-aggregation-for-high-fidelity-digital-asset-derivatives-rfq-protocols-on-prime-os.jpg)

## Price Fairness Assessment

Dark pool anonymity segments traders by information, concentrating price discovery in lit markets while offering execution benefits. </a><a href="https://prime.greeks.live/area/execution-framework/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstractly depicting an Institutional Digital Asset Derivatives ecosystem. A robust base supports intersecting conduits, symbolizing multi-leg spread execution and smart order routing](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-engine-optimization.jpg)

## Execution Framework

Meaning ▴ An Execution Framework represents a comprehensive, programmatic system designed to facilitate the systematic processing and routing of trading orders across various market venues, optimizing for predefined objectives such as price, speed, or minimized market impact. </a><a href="https://prime.greeks.live/question/how-does-pre-trade-risk-assessment-differ-between-liquid-and-illiquid-asset-classes/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, metallic instrument with a central pivot and pointed arm, featuring a reflective surface and a teal band, embodies an institutional RFQ protocol. This represents high-fidelity execution for digital asset derivatives, enabling private quotation and optimal price discovery for multi-leg spread strategies within a dark pool, powered by a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-for-optimal-liquidity-discovery.jpg)

## Pre-Trade Price Fairness Assessment

Pre-trade risk architecture adapts from a real-time, algorithmic gateway for liquid assets to a multi-stage investigative workflow for illiquid ones. </a><a href="https://prime.greeks.live/area/rts-28/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A complex core mechanism with two structured arms illustrates a Principal Crypto Derivatives OS executing RFQ protocols. This system enables price discovery and high-fidelity execution for institutional digital asset derivatives block trades, optimizing market microstructure and capital efficiency via private quotations](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-digital-asset-derivatives-rfq-execution-protocol-system.jpg)

## Rts 28

Meaning ▴ RTS 28 refers to Regulatory Technical Standard 28 under MiFID II, which mandates investment firms and market operators to publish annual reports on the quality of execution of transactions on trading venues and for financial instruments. </a>

**Tags:** [TCA](https://options.greeks.live/area/tca/), [Fair Value](https://options.greeks.live/area/fair-value/), [Execution Venues](https://options.greeks.live/area/execution-venues/), [Order Execution Policy](https://options.greeks.live/area/order-execution-policy/), [Transaction Cost Analysis](https://options.greeks.live/area/transaction-cost-analysis/), [Financial Instrument](https://options.greeks.live/area/financial-instrument/)	

## Discover More

- 
### [What Are the Key Differences in Best Execution Obligations between an SI and a Traditional Broker?](https://options.greeks.live/question/what-are-the-key-differences-in-best-execution-obligations-between-an-si-and-a-traditional-broker/)
![A metallic precision tool rests on a circuit board, its glowing traces depicting market microstructure and algorithmic trading. A reflective disc, symbolizing a liquidity pool, mirrors the tool, highlighting high-fidelity execution and price discovery for institutional digital asset derivatives via RFQ protocols and Principal's Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocols-driving-high-fidelity-execution-and-market-microstructure-optimization-via-principal-prime-os.jpg)

The primary difference is agency versus principal: a broker must search all venues for the best result, while an SI must provide a fair price from its own book.

- 
### [What Are the Primary Challenges Firms Face When Implementing a MiFID II Compliant Best Execution Policy?](https://options.greeks.live/question/what-are-the-primary-challenges-firms-face-when-implementing-a-mifid-ii-compliant-best-execution-policy/)
![A luminous central hub with radiating arms signifies an institutional RFQ protocol engine. It embodies seamless liquidity aggregation and high-fidelity execution for multi-leg spread strategies. Varied quadrants represent diverse market microstructure, optimizing capital efficiency within a principal's operational framework, mitigating counterparty risk.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-hub-for-optimal-liquidity-aggregation.jpg)

MiFID II best execution requires a systemic fusion of data, governance, and analytics to demonstrably prove optimal client outcomes.

- 
### [How Do the Safe Harbors for Best Execution Differ between the US and EU Regimes?](https://options.greeks.live/question/how-do-the-safe-harbors-for-best-execution-differ-between-the-us-and-eu-regimes/)
![A transparent cylinder containing a white sphere floats between two curved structures, each featuring a glowing teal line. This depicts institutional-grade RFQ protocols driving high-fidelity execution of digital asset derivatives, facilitating private quotation and liquidity aggregation through a Prime RFQ for optimal block trade atomic settlement.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-high-fidelity-execution-6.jpg)

The US best execution safe harbor is built on proving diligent price-seeking, while the EU's is built on proving fidelity to a transparent process.

- 
### [How Does MiFID II Define the Key Factors for Achieving Best Execution?](https://options.greeks.live/question/how-does-mifid-ii-define-the-key-factors-for-achieving-best-execution/)
![A sleek, angular device with a prominent, reflective teal lens. This Institutional Grade Private Quotation Gateway embodies High-Fidelity Execution via Optimized RFQ Protocol for Digital Asset Derivatives. It streamlines Algorithmic Price Discovery and Latent Liquidity Aggregation for Prime Brokerage.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-crypto-derivatives-rfq-high-fidelity-execution-gateway.jpg)

MiFID II defines best execution as a continuous, evidence-based obligation to construct a system that delivers the optimal result by weighing factors like price, cost, and speed.

- 
### [What Are the Primary Differences in Best Execution Requirements between the Sec and Mi Fid Ii?](https://options.greeks.live/question/what-are-the-primary-differences-in-best-execution-requirements-between-the-sec-and-mi-fid-ii/)
![A metallic, circular mechanism, a precision control interface, rests on a dark circuit board. This symbolizes the core intelligence layer of a Prime RFQ, enabling low-latency, high-fidelity execution for institutional digital asset derivatives via optimized RFQ protocols, refining market microstructure.](https://options.greeks.live/wp-content/uploads/2025/08/precision-rfq-protocol-engine-for-institutional-digital-asset-derivatives.jpg)

SEC and MiFID II diverge fundamentally: the SEC mandates a duty to achieve favorable outcomes, while MiFID II prescribes a detailed process to prove it.

- 
### [How Does the Concept of Best Execution Differ between MiFID II and Other Regulatory Frameworks for RFQ Trades?](https://options.greeks.live/question/how-does-the-concept-of-best-execution-differ-between-mifid-ii-and-other-regulatory-frameworks-for-rfq-trades/)
![Abstract depiction of an institutional digital asset derivatives execution system. A central market microstructure wheel supports a Prime RFQ framework, revealing an algorithmic trading engine for high-fidelity execution of multi-leg spreads and block trades via advanced RFQ protocols, optimizing capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-execution-system-1.jpg)

MiFID II codifies RFQ best execution as a prescriptive data-driven process, while other frameworks prioritize a principles-based defense of diligence.

- 
### [How Has MiFID II Changed Best Execution Requirements for Fixed Income?](https://options.greeks.live/question/how-has-mifid-ii-changed-best-execution-requirements-for-fixed-income/)
![A teal-blue disk, symbolizing a liquidity pool for digital asset derivatives, is intersected by a bar. This represents an RFQ protocol or block trade, detailing high-fidelity execution pathways. The interaction illustrates price discovery and market microstructure dynamics, central to a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocols-high-fidelity-digital-asset-execution.jpg)

MiFID II transformed fixed income best execution from a qualitative judgment into a data-driven, provable discipline.

- 
### [How Does MiFID II Specifically Impact Best Execution Obligations for Automated RFQ Platforms?](https://options.greeks.live/question/how-does-mifid-ii-specifically-impact-best-execution-obligations-for-automated-rfq-platforms/)
![A central core, symbolizing a Crypto Derivatives OS and Liquidity Pool, is intersected by two abstract elements. These represent Multi-Leg Spread and Cross-Asset Derivatives executed via RFQ Protocol. This visual embodies High-Fidelity Execution within an Institutional Trading framework, emphasizing Market Microstructure and Capital Efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-protocol-multi-leg-spread-execution.jpg)

MiFID II compels firms on RFQ platforms to build a data-driven, defensible audit trail, transforming compliance into an execution advantage.

- 
### [How Does MiFID II Define Best Execution for Different Venue Types?](https://options.greeks.live/question/how-does-mifid-ii-define-best-execution-for-different-venue-types/)
![A luminous conical element projects from a multi-faceted transparent teal crystal, signifying RFQ protocol precision and price discovery. This embodies institutional grade digital asset derivatives high-fidelity execution, leveraging Prime RFQ for liquidity aggregation and atomic settlement.](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-rfq-protocol-orchestration-for-institutional-digital-asset-derivatives-high-fidelity-execution.jpg)

MiFID II defines best execution as a data-driven process of taking all sufficient steps to optimize outcomes across a multi-venue system.

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---

**Original URL:** https://options.greeks.live/question/how-do-regulatory-frameworks-like-mifid-ii-define-best-execution-for-assets-traded-over-the-counter/
