# How Do Regulatory Frameworks like MiFID II Define Best Execution for OTC Derivatives? ▴ Question

**Published:** 2025-08-06
**Categories:** Question

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## Concept

Defining [best execution](https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) for over-the-counter (OTC) derivatives under [MiFID II](https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) requires a fundamental shift in perspective. It moves the obligation from a simple pursuit of the best price to the engineering of a robust, evidence-based execution framework. For institutional participants, this is a systemic challenge.

The regulation codifies a duty to construct and maintain a decision-making architecture that consistently delivers the optimal outcome for a client, considering a dynamic set of variables. The application of this principle to the [OTC derivatives](https://prime.greeks.live/area/otc-derivatives/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) market introduces significant complexity due to the inherent nature of these instruments.

Unlike exchange-traded products, OTC derivatives lack a centralized price feed and public order book. Their bespoke nature means that liquidity is fragmented, pricing is often derived from internal models, and transparency is limited. MiFID II addresses this by mandating that firms take “all [sufficient steps](https://prime.greeks.live/area/sufficient-steps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” to achieve the best possible result. This phrasing is a deliberate elevation from the previous “all reasonable steps” standard.

It compels a firm to build a systematic, repeatable, and auditable process for every execution. The core of the challenge lies in demonstrating the fairness of a price for a bespoke product by gathering [market data](https://prime.greeks.live/area/market-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and, where possible, comparing it to similar or comparable products. This transforms the act of execution from a simple transaction into a rigorous data-gathering and analytical exercise.

> The essence of MiFID II’s best execution for OTC derivatives is the mandate to create a verifiable and systematic process that proves the chosen execution strategy was optimal across multiple, weighted factors.

This regulatory requirement forces firms to internalize a new operational philosophy. The focus shifts from merely securing a favorable quote to architecting a system that can defend that quote’s superiority against a range of other possibilities. It is an obligation of means, not just of results.

A firm must be able to prove that its [execution policy](https://prime.greeks.live/area/execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and arrangements are designed to deliver the best outcome on a consistent basis. For OTC instruments, this means developing a sophisticated capacity for pre-trade analysis, counterparty selection, and post-trade evaluation, all supported by a robust data infrastructure.

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## Strategy

A successful strategy for meeting MiFID II best execution obligations for OTC derivatives is built upon a detailed and client-centric Execution Policy. This document is the strategic blueprint that governs a firm’s entire execution process. It must clearly articulate how the firm will weigh and prioritize a set of prescribed “[execution factors](https://prime.greeks.live/area/execution-factors/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” to deliver the best possible result. The regulation moves beyond a singular focus on price to a more holistic evaluation of [execution quality](https://prime.greeks.live/area/execution-quality/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

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## The Core Execution Factors

MiFID II stipulates that a firm’s [execution strategy](https://prime.greeks.live/area/execution-strategy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) must consider several key factors. The relative importance of these factors must be determined based on the client’s classification (retail or professional), the nature of the order, and the specific characteristics of the financial instrument.

- **Price** This remains a primary consideration, but it is not the sole determinant. For OTC derivatives, checking the fairness of the price involves gathering market data used in the firm’s own valuation models and comparing quotes from multiple counterparties where possible.

- **Costs** This includes all explicit and implicit costs associated with the transaction, such as clearing fees, settlement charges, and the potential market impact of the trade itself.

- **Speed of Execution** The relevance of this factor varies significantly. For a standard, liquid [interest rate swap](https://prime.greeks.live/area/interest-rate-swap/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), speed might be important. For a highly structured, illiquid credit derivative, the likelihood of successful execution may take precedence.

- **Likelihood of Execution and Settlement** This is a critical factor in the often-fragmented OTC markets. The strategy must account for [counterparty risk](https://prime.greeks.live/area/counterparty-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and the certainty of completing the transaction as intended.

- **Size and Nature of the Order** A large or complex multi-leg order requires a different strategic approach than a simple vanilla swap. The execution strategy must be tailored to the specific risk profile and complexity of the instrument.

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## How Should Firms Structure Their Execution Policy?

The Execution Policy is a formal document that must be agreed upon with clients. It needs to detail, for each class of instrument, the venues and counterparties the firm will use and the logic behind these choices. For OTC derivatives, this means specifying the types of liquidity providers (e.g. bank market makers, specialized funds) the firm will approach and the criteria for their selection. A firm can even use a single venue or counterparty, provided it can demonstrate on an ongoing basis that this choice consistently leads to the best results for clients.

The table below outlines a strategic framework for applying execution factors to different types of OTC derivatives, illustrating the necessary shift in priorities.

| OTC Derivative Type | Primary Factor | Secondary Factor(s) | Strategic Rationale |
| --- | --- | --- | --- |
| Standard Interest Rate Swap (Liquid) | Price | Costs, Speed | In a liquid market with multiple available counterparties, competitive pricing is the key driver. Low latency and minimal transaction costs are important secondary considerations to optimize the final execution price. |
| Exotic Equity Option (Illiquid) | Likelihood of Execution | Price, Counterparty Risk | For bespoke and illiquid instruments, the primary challenge is finding a willing and capable counterparty. The ability to execute the trade successfully outweighs small variations in price. The creditworthiness of the counterparty is also paramount. |
| Large Commodity Forward (Size) | Minimizing Market Impact | Price, Likelihood of Settlement | Executing a large order requires a strategy that avoids signaling intent to the market, which could cause adverse price movement. The execution strategy might involve breaking the order into smaller pieces or using a specialized execution algorithm. |

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## Monitoring and Review the Dynamic Loop

A core component of the MiFID II strategy is the obligation for continuous monitoring and annual review. Firms must regularly assess whether their chosen execution venues and counterparties are delivering the best results. This involves a data-driven process of [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)) and comparing execution quality against the firm’s stated policy.

If deficiencies are found, the policy and arrangements must be corrected. This creates a dynamic feedback loop where execution data informs and refines execution strategy over time, ensuring the firm’s approach remains robust and compliant.

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## Execution

The execution of a MiFID II-compliant best execution framework for OTC derivatives is a data-intensive operational process. It requires the systematic collection, analysis, and storage of information at every stage of the trade lifecycle. This operational reality moves the concept of best execution from a qualitative goal to a quantitative, evidence-based discipline. Firms must build or integrate systems capable of capturing the necessary data points to not only guide execution decisions but also to prove their validity to regulators and clients.

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## A Three-Stage Data Architecture

To meet the “all sufficient steps” requirement, a firm’s execution protocol must be structured around three critical stages pre-trade, at-trade, and post-trade. Each stage has distinct data requirements that form a complete audit trail of the execution process.

- **Pre-Trade Analysis** This is the foundational stage where the firm establishes the context for the trade. The objective is to define the parameters for the best possible result before approaching the market. Key data points include market conditions, available liquidity sources, and an independent valuation of the derivative based on fair market value.

- **At-Trade Decision Making** This is the point of execution where the firm must capture the data that justifies its final decision. This involves logging all quotes received, the rationale for selecting one counterparty over others, and any other relevant factors that influenced the trade.

- **Post-Trade Verification** After the trade is completed, the firm must analyze the execution quality to verify that the best outcome was achieved and to feed data back into the strategic review loop. This involves [Transaction Cost](https://prime.greeks.live/area/transaction-cost/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) Analysis (TCA) and reporting.

> Demonstrating best execution for OTC derivatives is fundamentally an exercise in data integrity and analytical rigor, transforming compliance from a checklist into a core operational capability.

The following table provides a granular view of the data points that a firm’s systems must capture and analyze to build a defensible best execution file for an OTC derivative transaction.

| Execution Stage | Required Data Point | System Function | Compliance Purpose |
| --- | --- | --- | --- |
| Pre-Trade | Independent “Fair Value” Price | Internal pricing model using approved market data inputs (e.g. yield curves, volatility surfaces). | Establishes a benchmark against which to measure the fairness of received quotes. |
| Pre-Trade | List of Potential Counterparties | Counterparty management system with data on creditworthiness and historical execution quality. | Documents that a sufficient and appropriate pool of liquidity providers was considered. |
| At-Trade | Timestamped Quotes Received | RFQ system or manual log of all quotes solicited and received from counterparties. | Provides concrete evidence of the competitive landscape at the moment of execution. |
| At-Trade | Rationale for Counterparty Selection | Execution Management System (EMS) field requiring trader input or automated logic log. | Justifies why the chosen quote represented the best result based on the weighted execution factors. |
| Post-Trade | Transaction Cost Analysis (TCA) | Analytics platform comparing the executed price against the pre-trade benchmark and other market data. | Quantitatively measures execution performance and identifies any deficiencies in the process. |
| Post-Trade | RTS 28 Reporting Data | Data warehouse that aggregates trade data to identify the top five execution venues/counterparties by volume. | Fulfills the public disclosure requirement and informs the annual review of the execution policy. |

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## What Does Quantitative Monitoring Involve?

For OTC derivatives, quantitative monitoring cannot rely on a public tape. Instead, firms must use their own data to construct a robust analytical framework. For an interest rate swap, for instance, a TCA report would compare the executed swap rate against the mid-rate derived from the firm’s own yield curve at the time of the trade. The deviation, or “slippage,” can be measured in basis points.

This analysis would be performed across all similar trades to identify patterns, assess the quality of execution provided by different counterparties, and determine if the firm’s execution policy is consistently delivering results within an acceptable tolerance. This quantitative evidence is the ultimate proof of a functioning best execution system.

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## References

- Khwaja, Amir. “MiFID II and Best Execution for Derivatives.” Clarus Financial Technology, 2015.

- Laven Partners. “A Guide to FX Best Execution.” 2018.

- Autorité des Marchés Financiers (AMF). “Guide to best execution.” 2021.

- Bovill. “Best Execution Under MiFID II.” 2017.

- Planet Compliance. “In a nutshell ▴ Best Execution under MiFID II/MiFIR.” 2018.

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## Reflection

The architecture of MiFID II’s best execution framework compels a deep introspection into a firm’s operational capabilities. It moves the conversation beyond mere compliance and into the realm of systemic design. The regulation effectively asks ▴ is your execution process an assembly of disparate actions, or is it a coherent, data-driven system designed for a superior outcome? The capacity to answer this question affirmatively requires more than a policy document; it demands an integrated infrastructure where data flows seamlessly from pre-trade analysis to post-trade verification.

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## How Does Your Data Architecture Support Demonstrable Proof?

Consider the journey of a single OTC derivative order within your current framework. Can you, at any point, produce a complete, time-stamped, and quantitatively supported record that justifies every decision made? The ability to produce this evidence on demand is the true test of a robust system. The knowledge gained from this regulatory framework should be viewed as a catalyst for building a more intelligent and resilient operational core, one that turns a compliance burden into a source of competitive and strategic advantage.

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## Glossary

<a href="https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## 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/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## 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-derivatives/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## 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/sufficient-steps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## 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/market-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## 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/execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## 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/execution-factors/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## 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-quality/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## 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-strategy/?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)

## Execution Strategy

Meaning ▴ A defined algorithmic or systematic approach to fulfilling an order in a financial market, aiming to optimize specific objectives like minimizing market impact, achieving a target price, or reducing transaction costs. </a><a href="https://prime.greeks.live/area/interest-rate-swap/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An institutional grade system component, featuring a reflective intelligence layer lens, symbolizes high-fidelity execution and market microstructure insight. This enables price discovery for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-precision-rfq-execution-system-interface.jpg)

## Interest Rate Swap

Meaning ▴ An Interest Rate Swap (IRS) is a bilateral over-the-counter derivative contract in which two parties agree to exchange future interest payments over a specified period, based on a predetermined notional principal amount. </a><a href="https://prime.greeks.live/area/counterparty-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Symmetrical internal components, light green and white, converge at central blue nodes. This abstract representation embodies a Principal's operational framework, enabling high-fidelity execution of institutional digital asset derivatives via advanced RFQ protocols, optimizing market microstructure for price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-core.jpg)

## Counterparty Risk

Meaning ▴ Counterparty risk denotes the potential for financial loss stemming from a counterparty's failure to fulfill its contractual obligations in a transaction. </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">
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## 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 polished, abstract geometric form represents a dynamic RFQ Protocol for institutional-grade digital asset derivatives. A central liquidity pool is surrounded by opening market segments, revealing an emerging arm displaying high-fidelity execution data](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-institutional-digital-asset-derivatives-rfq-protocol-system.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/transaction-cost/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision-engineered metallic component displays two interlocking gold modules with circular execution apertures, anchored by a central pivot. This symbolizes an institutional-grade digital asset derivatives platform, enabling high-fidelity RFQ execution, optimized multi-leg spread management, and robust prime brokerage liquidity](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-core-for-institutional-trade-flow.jpg)

## Transaction Cost

Meaning ▴ Transaction Cost represents the total quantifiable economic friction incurred during the execution of a trade, encompassing both explicit costs such as commissions, exchange fees, and clearing charges, alongside implicit costs like market impact, slippage, and opportunity cost. </a>

**Tags:** [Best Execution](https://options.greeks.live/area/best-execution/), [Interest Rate Swap](https://options.greeks.live/area/interest-rate-swap/), [Price Fairness](https://options.greeks.live/area/price-fairness/), [Transaction Cost Analysis](https://options.greeks.live/area/transaction-cost-analysis/), [Execution Strategy](https://options.greeks.live/area/execution-strategy/), [Cost Analysis](https://options.greeks.live/area/cost-analysis/)	

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### [How Does MiFID II Define Best Execution for RFQ-Based Trades?](https://options.greeks.live/question/how-does-mifid-ii-define-best-execution-for-rfq-based-trades-2/)
![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)

MiFID II defines RFQ best execution as a continuous, evidence-based process of taking all sufficient steps to achieve the best overall client outcome.

- 
### [How Does MiFID II Define Best Execution for Complex Derivatives?](https://options.greeks.live/question/how-does-mifid-ii-define-best-execution-for-complex-derivatives/)
![A precision-engineered interface for institutional digital asset derivatives. A circular system component, perhaps an Execution Management System EMS module, connects via a multi-faceted Request for Quote RFQ protocol bridge to a distinct teal capsule, symbolizing a bespoke block trade. This depicts high-fidelity execution, optimizing market microstructure within a Principal's operational framework for atomic settlement.](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-interface-for-institutional-digital-asset-derivatives-request-for-quote-protocol-high-fidelity-execution-within-principal-operating-system.jpg)

MiFID II defines best execution for complex derivatives as a systematic process of achieving the optimal result based on a weighted analysis of price, cost, speed, and counterparty risk.

- 
### [How Has Technology Changed the Way Firms Meet MiFID II Best Execution Obligations for OTC Instruments?](https://options.greeks.live/question/how-has-technology-changed-the-way-firms-meet-mifid-ii-best-execution-obligations-for-otc-instruments/)
![A reflective, metallic platter with a central spindle and an integrated circuit board edge against a dark backdrop. This imagery evokes the core low-latency infrastructure for institutional digital asset derivatives, illustrating high-fidelity execution and market microstructure dynamics. It signifies the robust Prime RFQ underpinning RFQ protocols for atomic settlement and best execution.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-infrastructure-precision.jpg)

Technology transforms MiFID II OTC compliance from a subjective process into an auditable, data-driven engineering discipline.

- 
### [How Does an OTF’s Discretionary Mandate Alter the Proof of Best Execution?](https://options.greeks.live/question/how-does-an-otfs-discretionary-mandate-alter-the-proof-of-best-execution/)
![A sleek cream-colored device with a dark blue optical sensor embodies Price Discovery for Digital Asset Derivatives. It signifies High-Fidelity Execution via RFQ Protocols, driven by an Intelligence Layer optimizing Market Microstructure for Algorithmic Trading on a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-high-fidelity-execution-engine-optimized-rfq-protocols-prime-os-intelligence-layer.jpg)

An OTF's discretionary mandate reframes best execution from a quantitative price check to a qualitative, evidence-based defense of the entire trade lifecycle.

- 
### [What Are the Primary Regulatory Frameworks Governing Best Execution in the US and Europe?](https://options.greeks.live/question/what-are-the-primary-regulatory-frameworks-governing-best-execution-in-the-us-and-europe/)
![A teal and white sphere precariously balanced on a light grey bar, itself resting on an angular base, depicts market microstructure at a critical price discovery point. This visualizes high-fidelity execution of digital asset derivatives via RFQ protocols, emphasizing capital efficiency and risk aggregation within a Principal trading desk's operational framework.](https://options.greeks.live/wp-content/uploads/2025/07/precision-institutional-digital-asset-derivatives-rfq-execution-strategy.jpg)

The primary regulatory frameworks for best execution in the US and Europe mandate a demonstrable, data-driven process for achieving the most favorable client outcomes in fragmented markets.

- 
### [What Are the Core Components of a Defensible Best Execution Policy after the Repeal of RTS 28?](https://options.greeks.live/question/what-are-the-core-components-of-a-defensible-best-execution-policy-after-the-repeal-of-rts-28/)
![A sophisticated institutional-grade system's internal mechanics. A central metallic wheel, symbolizing an algorithmic trading engine, sits above glossy surfaces with luminous data pathways and execution triggers. This abstract visualizes high-fidelity execution for digital asset derivatives, optimizing market microstructure and RFQ protocol efficiency within a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-engine-core.jpg)

A defensible best execution policy post-RTS 28 is a dynamic, data-driven framework embedded in a firm's culture, focused on demonstrable client outcomes.

- 
### [How Does MiFID II Define the Best Execution Requirements for Firms?](https://options.greeks.live/question/how-does-mifid-ii-define-the-best-execution-requirements-for-firms/)
![A sleek, cream-colored, dome-shaped object with a dark, central, blue-illuminated aperture, resting on a reflective surface against a black background. This represents a cutting-edge Crypto Derivatives OS, facilitating high-fidelity execution for institutional digital asset derivatives. Its central aperture symbolizes intelligent price discovery and real-time market microstructure analysis, crucial for optimal RFQ protocol management and multi-leg spread strategies, embodying prime brokerage capabilities.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-prime-os-high-fidelity-rfq-execution-engine-intelligence-layer.jpg)

MiFID II defines best execution as a firm's auditable, data-driven obligation to structure its entire trading process to consistently deliver the most favorable outcome for clients.

- 
### [How Do Regulatory Frameworks like MiFID II Influence the Use of RFQ for Best Execution?](https://options.greeks.live/question/how-do-regulatory-frameworks-like-mifid-ii-influence-the-use-of-rfq-for-best-execution/)
![A metallic, cross-shaped mechanism centrally positioned on a highly reflective, circular silicon wafer. The surrounding border reveals intricate circuit board patterns, signifying the underlying Prime RFQ and intelligence layer. This setup symbolizes high-fidelity execution within market microstructure, enabling algorithmic trading for institutional-grade digital asset derivatives and RFQ protocols with atomic settlement.](https://options.greeks.live/wp-content/uploads/2025/08/the-core-institutional-digital-asset-derivatives-rfq-os-engine-for-high-fidelity-market-microstructure.jpg)

MiFID II transforms the RFQ into a data-driven, auditable process, mandating a systematic approach to proving best execution.

- 
### [How Can a Firm Demonstrate That It Has Achieved Best Execution for a Professional Client?](https://options.greeks.live/question/how-can-a-firm-demonstrate-that-it-has-achieved-best-execution-for-a-professional-client/)
![A detailed view of an institutional-grade Digital Asset Derivatives trading interface, featuring a central liquidity pool visualization through a clear, tinted disc. Subtle market microstructure elements are visible, suggesting real-time price discovery and order book dynamics. This represents a Prime RFQ component for high-fidelity execution of RFQ protocols in multi-leg spread strategies.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-system-microstructure-display.jpg)

A firm demonstrates best execution by systematically evidencing that its data-driven process was optimally designed to serve the client's specific order context.

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---

**Original URL:** https://options.greeks.live/question/how-do-regulatory-frameworks-like-mifid-ii-define-best-execution-for-otc-derivatives/
