# How Do Systematic Internalisers Impact Best Execution Obligations in the European Union? ▴ Question

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

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![A Principal's RFQ engine core unit, featuring distinct algorithmic matching probes for high-fidelity execution and liquidity aggregation. This price discovery mechanism leverages private quotation pathways, optimizing crypto derivatives OS operations for atomic settlement within its systemic architecture](https://options.greeks.live/wp-content/uploads/2025/08/principals-rfq-engine-driving-optimal-digital-asset-derivatives.jpg)

![A sleek, illuminated object, symbolizing an advanced RFQ protocol or Execution Management System, precisely intersects two broad surfaces representing liquidity pools within market microstructure. Its glowing line indicates high-fidelity execution and atomic settlement of digital asset derivatives, ensuring best execution and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/principals-rfq-protocol-high-fidelity-execution-digital-asset-derivatives-market-microstructure-price-discovery-alpha-generation.jpg)

## Concept

The introduction of [Systematic Internalisers](https://prime.greeks.live/area/systematic-internalisers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (SIs) under the Markets in Financial Instruments Directive II (MiFID II) represents a fundamental recalibration of European [market structure](https://prime.greeks.live/area/market-structure/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). An SI is an investment firm that, on an organized, frequent, systematic, and substantial basis, deals on its own account when executing client orders outside a regulated market, a Multilateral Trading Facility (MTF), or an Organised Trading Facility (OTF). This framework positions SIs as a hybrid model, combining elements of bilateral, over-the-counter (OTC) trading with the transparency obligations typically associated with public exchanges.

Their primary function is to internalize client order flow, meaning they act as the direct counterparty to the trade rather than routing it to an external venue. This structure is designed to provide a deep source of [liquidity](https://prime.greeks.live/area/liquidity/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), particularly for large or less liquid trades, by allowing firms to manage risk from their own books.

![A marbled sphere symbolizes a complex institutional block trade, resting on segmented platforms representing diverse liquidity pools and execution venues. This visualizes sophisticated RFQ protocols, ensuring high-fidelity execution and optimal price discovery within dynamic market microstructure for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/principal-rfq-aggregation-digital-asset-derivative-execution-optimization.jpg)

## The Core Mechanism of a Systematic Internaliser

An investment firm qualifies as an SI for a specific financial instrument based on quantitative thresholds that measure the frequency and size of its OTC trading activities. Once a firm crosses these thresholds for a particular instrument, it is obligated to act as an SI for that instrument. This designation carries significant responsibilities, most notably the obligation to provide firm quotes to clients upon request for liquid instruments up to a certain size (Standard Market Size). These quotes must be made public and reflect prevailing market conditions.

The core operational principle is that the SI uses its own capital to complete the client’s order, absorbing the risk and providing certainty of execution. This is a departure from an agency model, where a broker would simply find a counterparty on an external market. The SI model is predicated on the firm’s ability to manage its own inventory and risk, making it a vital source of liquidity, especially in volatile or illiquid market conditions.

> Systematic Internalisers are investment firms that execute client orders on their own account, providing a key source of liquidity outside traditional trading venues.

![Abstractly depicting an Institutional Grade Crypto Derivatives OS component. Its robust structure and metallic interface signify precise Market Microstructure for High-Fidelity Execution of RFQ Protocol and Block Trade orders](https://options.greeks.live/wp-content/uploads/2025/07/principals-integrated-crypto-derivatives-rfq-protocol-architecture.jpg)

## Best Execution a Mandate of Utmost Importance

[Best execution](https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is a cornerstone of investor protection in the [European Union](https://prime.greeks.live/area/european-union/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). It is not merely about achieving the lowest price but about taking all sufficient steps to obtain the best possible result for clients on a consistent basis. The obligation, enshrined in Article 27 of MiFID II, requires firms to consider a range of execution factors. While price and costs are paramount, other factors are also critical to the overall outcome for the client. 

- **Price** The price at which the transaction is executed.

- **Costs** Explicit and implicit costs associated with the trade, including execution venue fees, clearing and settlement fees, and any other charges passed on to the client. 

- **Speed of Execution** The time it takes to complete the trade, which can be critical in fast-moving markets.

- **Likelihood of Execution and Settlement** The certainty that the trade will be completed and settled successfully. This is particularly relevant for large or illiquid orders.

- **Size and Nature of the Order** The specific characteristics of the order, which may influence the choice of execution venue. A large block order, for instance, might be better suited for an SI to minimize [market impact](https://prime.greeks.live/area/market-impact/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). 

- **Market Impact** The effect the trade itself has on the prevailing market price. A key objective of best execution is to minimize adverse market impact.

To comply with this obligation, [investment firms](https://prime.greeks.live/area/investment-firms/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) must establish and implement an order [execution policy](https://prime.greeks.live/area/execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) that outlines how they will achieve the best possible result for their clients. This policy must detail the different execution venues and factors the firm considers and the relative importance it places on each. The existence of SIs adds another layer to this decision-making process, providing an alternative liquidity pool that must be evaluated against traditional exchanges and MTFs. 

![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)

![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)

## Strategy

Integrating Systematic Internalisers into a best execution framework is a strategic imperative for investment firms operating under [MiFID II](https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The decision to route an order to an SI is a complex one, requiring a dynamic assessment of multiple, often competing, execution factors. A firm’s execution policy must be sophisticated enough to determine when the benefits of SI execution ▴ such as [price improvement](https://prime.greeks.live/area/price-improvement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), reduced market impact, and certainty of execution ▴ outweigh the potential advantages of other venues like regulated markets or MTFs. This evaluation is not a one-time decision but an ongoing process of monitoring and review to ensure that the chosen execution strategy consistently delivers the best possible results for clients. 

![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)

## The Strategic Calculus of SI Execution

When considering an SI as an execution venue, a firm must weigh several strategic considerations. A primary advantage of SIs is the potential for price improvement. Because SIs trade on their own account, they have the flexibility to offer prices that are better than the current public bid or offer on a [regulated market](https://prime.greeks.live/area/regulated-market/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This is a significant factor in fulfilling the best execution obligation, as the total consideration for the client is a key metric.

However, price is not the only variable. For large orders, the ability to execute without causing significant market impact is a critical advantage of SIs. A large order placed on a public exchange can signal the trader’s intent to the broader market, leading to adverse price movements. By executing bilaterally with an SI, a firm can mitigate this risk, preserving the value of the trade for the client.

> A firm’s strategy must dynamically assess when the certainty and reduced market impact of an SI provide a better overall result than the price on a public venue.

Furthermore, the certainty of execution offered by an SI is a powerful strategic tool. When an SI provides a firm quote, it is obligated to trade at that price up to a certain size. This removes the uncertainty inherent in order book trading, where an order may only be partially filled or may not be filled at all if the market moves away.

This is particularly valuable in volatile or illiquid markets where liquidity on public venues can be thin and unreliable. The trade-off, however, is that the firm is executing against a single counterparty, which introduces its own set of considerations, including counterparty risk and the potential for information leakage if not managed correctly.

![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)

## Comparative Venue Analysis

A robust best execution strategy requires a systematic comparison of SIs against other available [execution venues](https://prime.greeks.live/area/execution-venues/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This analysis must be data-driven and tailored to the specific characteristics of each order. The following table outlines some of the key comparative factors:

### Table 1 ▴ Comparative Analysis of Execution Venues

| Factor | Systematic Internaliser (SI) | Regulated Market/MTF |
| --- | --- | --- |
| Liquidity Source | Principal liquidity from the SI’s own account. | Multilateral order book with diverse participants. |
| Market Impact | Generally lower, as trades are bilateral and not displayed pre-trade in the same way. | Higher potential for market impact, especially for large orders. |
| Price Discovery | Contributes to price discovery through post-trade transparency, but the initial price is set by the SI. | Central to the price discovery process through the interaction of bids and offers. |
| Execution Certainty | High, as the SI provides a firm quote and acts as the direct counterparty. | Variable, dependent on market depth and volatility. Orders may be partially filled. |
| Transparency | Pre-trade quote transparency for liquid instruments and post-trade transparency for all trades. | High pre-trade and post-trade transparency through the public order book. |

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![Abstract geometric structure with sharp angles and translucent planes, symbolizing institutional digital asset derivatives market microstructure. The central point signifies a core RFQ protocol engine, enabling precise price discovery and liquidity aggregation for multi-leg options strategies, crucial for high-fidelity execution and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/principals-operational-framework-optimizing-institutional-digital-asset-derivatives-rfq-protocol-execution-for-alpha-generation.jpg)

## Execution

The execution of orders through a [Systematic Internaliser](https://prime.greeks.live/area/systematic-internaliser/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) requires a meticulous and evidence-based approach to satisfy [best execution obligations](https://prime.greeks.live/area/best-execution-obligations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). Investment firms must not only have a sophisticated execution policy but also the operational capabilities to implement it effectively and, crucially, to prove compliance to regulators. This involves a granular level of pre-trade analysis, real-time monitoring, and post-trade evaluation. The firm must be able to demonstrate, on a trade-by-trade basis, why the chosen execution method was the most appropriate for achieving the best possible result for the client. 

![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)

## Operationalizing Best Execution with SIs

The operational workflow for executing an order with an SI begins with the firm’s smart order router (SOR) or execution management system (EMS). These systems must be configured to include SIs as potential execution venues and to query them for quotes alongside other venues. When an order is received, the SOR should be able to send a request for quote (RFQ) to one or more SIs while simultaneously assessing the liquidity available on regulated markets and MTFs. The decision to route the order to an SI will then be based on a comparison of the SI’s quoted price against the prices available elsewhere, factoring in all other relevant execution criteria. 

> Firms must meticulously document their execution decisions, proving that the use of an SI was in the client’s best interest for that specific trade.

A critical component of this process is the firm’s ability to monitor the quality of execution provided by its chosen SIs. This is not a “set and forget” exercise. Firms are required to regularly review their execution arrangements and to make changes if they are not consistently delivering best execution.

This involves collecting and analyzing a vast amount of data, including the prices quoted by SIs, the speed of execution, the likelihood of execution, and any instances of price improvement. This data must then be compared against the execution quality data published by other venues to provide a comprehensive picture of the firm’s execution performance.

![The abstract image features angular, parallel metallic and colored planes, suggesting structured market microstructure for digital asset derivatives. A spherical element represents a block trade or RFQ protocol inquiry, reflecting dynamic implied volatility and price discovery within a dark pool](https://options.greeks.live/wp-content/uploads/2025/07/optimized-institutional-digital-asset-derivatives-rfq-protocol-framework-ensuring-principal-best-execution-and-latent-liquidity-capture.jpg)

## The Role of Transaction Cost Analysis

[Transaction Cost Analysis](https://prime.greeks.live/area/transaction-cost-analysis/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (TCA) is an indispensable tool for demonstrating compliance with best execution obligations when using SIs. TCA goes beyond a simple comparison of execution prices and delves into the implicit costs of trading, such as market impact and opportunity cost. By analyzing trade data against various benchmarks, TCA can provide a quantitative assessment of execution quality.

For example, a TCA report might compare the execution price of a trade with an SI against the volume-weighted average price (VWAP) for that instrument over the same period. This can help to determine whether the SI provided a favorable execution relative to the broader market.

The following table provides a simplified example of a TCA report for a series of trades executed across different venues, including an SI:

### Table 2 ▴ Sample Transaction Cost Analysis Report

| Trade ID | Venue | Execution Price (€) | Arrival Price (€) | VWAP (€) | Slippage vs. Arrival (bps) | Performance vs. VWAP (bps) |
| --- | --- | --- | --- | --- | --- | --- |
| 1001 | Regulated Market A | 10.02 | 10.00 | 10.03 | -20 | +10 |
| 1002 | Systematic Internaliser X | 10.01 | 10.00 | 10.03 | -10 | +20 |
| 1003 | MTF B | 10.04 | 10.00 | 10.03 | -40 | -10 |

In this example, the trade with the SI shows positive performance against both the arrival price and the VWAP, providing quantitative evidence that the firm achieved a good execution outcome. This type of analysis, conducted systematically across all trades, is essential for meeting the evidentiary burden of MiFID II’s best execution requirements.

- **Pre-Trade Analysis** Before an order is executed, the firm must assess the available liquidity and pricing across all potential venues, including SIs. This analysis should be documented and should inform the routing decision.

- **Real-Time Monitoring** During the execution process, the firm must monitor market conditions and the performance of its chosen venue in real-time. If conditions change, the firm must be prepared to alter its execution strategy to protect the client’s interests.

- **Post-Trade Reporting** After the trade is completed, the firm must conduct a thorough post-trade analysis to assess the quality of the execution. This includes TCA, as well as a qualitative review of the execution process. The results of this analysis should be used to refine the firm’s execution policy and arrangements on an ongoing basis.

![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)

## References

- European Securities and Markets Authority. “Best execution under MiFID.” ESMA/2015/109, 2015.

- Cleary Gottlieb. “Impact of MiFID II & MiFIR on end users of financial markets.” 30 October 2017.

- The TRADE. “ESMA firms up rules of engagement amid market turbulence.” 10 April 2025.

- Planet Compliance. “In a nutshell ▴ Best Execution under MiFID II/MiFIR.” 2 April 2024.

- European Banking Federation. “MIFID 2 Review ▴ Market Structure ▴ EBF priorities.” 2020.

- Gomber, P. et al. “Competition between trading venues ▴ The impact of systematic internalizers.” Journal of Banking & Finance, vol. 85, 2017, pp. 102-122.

- Foucault, T. and A. Manconi. “The new market microstructure ▴ A survey.” Annual Review of Financial Economics, vol. 11, 2019, pp. 1-26.

- ESMA. “MiFID II and MiFIR review report on the development in prices for pre- and post-trade data and on the consolidated tape for equity instruments.” ESMA70-156-2231, 2020.

![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)

## Reflection

![Intersecting metallic structures symbolize RFQ protocol pathways for institutional digital asset derivatives. They represent high-fidelity execution of multi-leg spreads across diverse liquidity pools](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-framework-optimizing-multi-leg-spreads-and-liquidity-aggregation-for-best-execution.jpg)

## A New Locus of Liquidity

The integration of Systematic Internalisers into the European financial landscape has created a new locus of liquidity, one that operates in parallel to traditional, multilateral [trading venues](https://prime.greeks.live/area/trading-venues/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This development necessitates a re-evaluation of established execution strategies and a deeper understanding of the trade-offs inherent in different liquidity pools. The challenge for investment firms is to harness the benefits of this new market structure while remaining steadfast in their commitment to the principles of best execution. This requires a sophisticated operational framework, a data-driven approach to decision-making, and a culture of continuous improvement.

![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)

## Beyond Compliance a Strategic Advantage

Ultimately, navigating the complexities of the modern market structure is not simply a matter of regulatory compliance. It is about securing a strategic advantage in an increasingly competitive environment. Firms that can effectively leverage the unique capabilities of SIs ▴ whether to minimize market impact, access deeper liquidity, or achieve price improvement ▴ will be better positioned to deliver superior results for their clients.

The journey towards mastering this new market dynamic is ongoing, but for those who are willing to invest in the necessary technology, expertise, and analytical rigor, the rewards are substantial. The question is no longer whether to engage with SIs, but how to do so in a way that maximizes value and reinforces the core tenets of best execution.

![A deconstructed mechanical system with segmented components, revealing intricate gears and polished shafts, symbolizing the transparent, modular architecture of an institutional digital asset derivatives trading platform. This illustrates multi-leg spread execution, RFQ protocols, and atomic settlement processes](https://options.greeks.live/wp-content/uploads/2025/07/deconstructed-principal-trading-system-revealing-core-mechanics-of-digital-asset-derivatives-execution.jpg)

## Glossary

<a href="https://prime.greeks.live/area/systematic-internalisers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Modular institutional-grade execution system components reveal luminous green data pathways, symbolizing high-fidelity cross-asset connectivity. This depicts intricate market microstructure facilitating RFQ protocol integration for atomic settlement of digital asset derivatives within a Principal's operational framework, underpinned by a Prime RFQ intelligence layer](https://options.greeks.live/wp-content/uploads/2025/07/modular-high-fidelity-execution-architecture-for-institutional-digital-asset-derivatives-rfq-protocol-integration-and-principals-operational-framework-optimization.jpg)

## Systematic Internalisers

Meaning ▴ A market participant, typically a broker-dealer, systematically executing client orders against its own inventory or other client orders off-exchange, acting as principal. </a><a href="https://prime.greeks.live/area/market-structure/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![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)

## Market Structure

Meaning ▴ Market structure defines the organizational and operational characteristics of a trading venue, encompassing participant types, order handling protocols, price discovery mechanisms, and information dissemination frameworks. </a><a href="https://prime.greeks.live/area/liquidity/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precisely engineered multi-component structure, split to reveal its granular core, symbolizes the complex market microstructure of institutional digital asset derivatives. This visual metaphor represents the unbundling of multi-leg spreads, facilitating transparent price discovery and high-fidelity execution via RFQ protocols within a Principal's operational framework](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-digital-asset-derivatives-rfq-protocols-revealing-market-microstructure-for-high-fidelity-execution-and-atomic-settlement-within-principals-operational-framework.jpg)

## Liquidity

Meaning ▴ Liquidity refers to the degree to which an asset or security can be converted into cash without significantly affecting its market price. </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 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](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)

## 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/european-union/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![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)

## European Union

Meaning ▴ The European Union functions as a supranational economic and political system, establishing a unified regulatory environment across its member states. </a><a href="https://prime.greeks.live/area/market-impact/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Reflective planes and intersecting elements depict institutional digital asset derivatives market microstructure. A central Principal-driven RFQ protocol ensures high-fidelity execution and atomic settlement across diverse liquidity pools, optimizing multi-leg spread strategies on a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-precision.jpg)

## Market Impact

Meaning ▴ Market Impact refers to the observed change in an asset's price resulting from the execution of a trading order, primarily influenced by the order's size relative to available liquidity and prevailing market conditions. </a><a href="https://prime.greeks.live/area/investment-firms/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision-engineered, stacked components embody a Principal OS for institutional digital asset derivatives. This multi-layered structure visually represents market microstructure elements within RFQ protocols, ensuring high-fidelity execution and liquidity aggregation](https://options.greeks.live/wp-content/uploads/2025/07/principal-os-architecture-for-institutional-digital-asset-derivatives-rfq.jpg)

## Investment Firms

Meaning ▴ Investment Firms are institutional entities primarily engaged in the management, deployment, and intermediation of capital within financial markets, operating as critical nodes in the global capital allocation network. </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">
![Intersecting concrete structures symbolize the robust Market Microstructure underpinning Institutional Grade Digital Asset Derivatives. Dynamic spheres represent Liquidity Pools and Implied Volatility](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-framework-optimizing-rfq-execution-and-liquidity-for-principal-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/price-improvement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Sleek metallic structures with glowing apertures symbolize institutional RFQ protocols. These represent high-fidelity execution and price discovery across aggregated liquidity pools](https://options.greeks.live/wp-content/uploads/2025/07/precision-digital-asset-derivatives-trading-systems-optimizing-rfq-protocols-for-institutional-block-trade-execution.jpg)

## Price Improvement

Meaning ▴ Price improvement denotes the execution of a trade at a more advantageous price than the prevailing National Best Bid and Offer (NBBO) at the moment of order submission. </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 fractured, polished disc with a central, sharp conical element symbolizes fragmented digital asset liquidity. This Principal RFQ engine ensures high-fidelity execution, precise price discovery, and atomic settlement within complex market microstructure, optimizing capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/principal-rfq-engine-unifying-fragmented-digital-asset-derivatives-liquidity-for-best-execution.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/regulated-market/?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)

## Regulated Market

Meaning ▴ A Regulated Market constitutes a formal trading venue operating under the direct oversight and prescriptive rules of a designated governmental or supranational authority, ensuring adherence to defined standards for market integrity, participant conduct, and operational transparency within the financial system. </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">
![Symmetrical, institutional-grade Prime RFQ component for digital asset derivatives. Metallic segments signify interconnected liquidity pools and precise price discovery](https://options.greeks.live/wp-content/uploads/2025/07/principals-prime-os-for-digital-asset-derivatives-rfq-execution.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/best-execution-obligations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![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)

## Best Execution Obligations

Meaning ▴ Best Execution Obligations define the regulatory and fiduciary imperative for financial intermediaries to achieve the most favorable terms reasonably available for client orders. </a><a href="https://prime.greeks.live/area/systematic-internaliser/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![The central teal core signifies a Principal's Prime RFQ, routing RFQ protocols across modular arms. Metallic levers denote precise control over multi-leg spread execution and block trades](https://options.greeks.live/wp-content/uploads/2025/07/principals-prime-os-rfq-system-institutional-digital-asset-derivatives.jpg)

## Systematic Internaliser

Meaning ▴ A Systematic Internaliser (SI) is a financial institution executing client orders against its own capital on an organized, frequent, systematic basis off-exchange. </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">
![A modular, dark-toned system with light structural components and a bright turquoise indicator, representing a sophisticated Crypto Derivatives OS for institutional-grade RFQ protocols. It signifies private quotation channels for block trades, enabling high-fidelity execution and price discovery through aggregated inquiry, minimizing slippage and information leakage within dark liquidity pools](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-system-for-optimal-execution-1.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/trading-venues/?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)

## Trading Venues

Meaning ▴ Trading Venues are defined as organized platforms or systems where financial instruments are bought and sold, facilitating price discovery and transaction execution through the interaction of bids and offers. </a>

**Tags:** [Systematic Internalisers](https://options.greeks.live/area/systematic-internalisers/), [European Union](https://options.greeks.live/area/european-union/), [Transaction Cost](https://options.greeks.live/area/transaction-cost/), [Market Impact](https://options.greeks.live/area/market-impact/), [Price Improvement](https://options.greeks.live/area/price-improvement/), [Regulated Market](https://options.greeks.live/area/regulated-market/)	

## Discover More

- 
### [How Did MiFID II’s Double Volume Caps Reshape European Liquidity Sourcing Strategies?](https://options.greeks.live/question/how-did-mifid-iis-double-volume-caps-reshape-european-liquidity-sourcing-strategies/)
![Abstract representation of a central RFQ hub facilitating high-fidelity execution of institutional digital asset derivatives. Two aggregated inquiries or block trades traverse the liquidity aggregation engine, signifying price discovery and atomic settlement within a prime brokerage framework.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-hub-core.jpg)

MiFID II's Double Volume Caps re-architected European trading by systematically diverting flow from dark pools to SIs and periodic auctions.

- 
### [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.

- 
### [How Does the Proof of Best Execution Differ between a Lit Market Order and an Automated RFQ?](https://options.greeks.live/question/how-does-the-proof-of-best-execution-differ-between-a-lit-market-order-and-an-automated-rfq/)
![A reflective disc, symbolizing a Prime RFQ data layer, supports a translucent teal sphere with Yin-Yang, representing Quantitative Analysis and Price Discovery for Digital Asset Derivatives. A sleek mechanical arm signifies High-Fidelity Execution and Algorithmic Trading via RFQ Protocol, within a Principal's Operational Framework.](https://options.greeks.live/wp-content/uploads/2025/07/precision-execution-digital-asset-derivatives-rfq-protocols-principal-trading-infrastructure-automated-liquidity-aggregation-intelligence-layer.jpg)

Proof of best execution contrasts post-trade analysis of public data for lit orders with at-trade documentation of competitive private quotes for RFQs.

- 
### [Can a Single Global Execution Policy Satisfy Both MiFID II and FINRA Requirements Simultaneously?](https://options.greeks.live/question/can-a-single-global-execution-policy-satisfy-both-mifid-ii-and-finra-requirements-simultaneously/)
![A precision sphere, an Execution Management System EMS, probes a Digital Asset Liquidity Pool. This signifies High-Fidelity Execution via Smart Order Routing for institutional-grade digital asset derivatives. It highlights Price Discovery and Pre-Trade Analytics within a Principal's Prime RFQ framework.](https://options.greeks.live/wp-content/uploads/2025/07/principal-rfq-engine-orchestrating-global-digital-asset-derivatives-liquidity-pool-price-discovery-and-high-fidelity-execution.jpg)

A single global execution policy can satisfy both MiFID II and FINRA by adopting the more stringent principles of MiFID II as a universal standard.

- 
### [How Do Regulators Define and Measure Best Execution in Practice?](https://options.greeks.live/question/how-do-regulators-define-and-measure-best-execution-in-practice/)
![Central intersecting blue light beams represent high-fidelity execution and atomic settlement. Mechanical elements signify robust market microstructure and order book dynamics. Large reflective panels depict institutional-grade liquidity pools for digital asset derivatives RFQ protocols, enabling optimal alpha generation and smart order routing via a Prime RFQ intelligence layer.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-visualizing-market-microstructure-for-high-fidelity-alpha-generation-via-prime-os.jpg)

Regulators define best execution as a firm's demonstrable diligence in seeking the most favorable terms for a client's order.

- 
### [How Do Regulatory Frameworks like MiFID II Influence Counterparty Selection and Best Execution Policies?](https://options.greeks.live/question/how-do-regulatory-frameworks-like-mifid-ii-influence-counterparty-selection-and-best-execution-policies/)
![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)

MiFID II mandates a systemic shift, transforming counterparty selection into a data-driven process governed by quantifiable best execution.

- 
### [How Does MiFID II Differ from Reg NMS in Defining Best Execution?](https://options.greeks.live/question/how-does-mifid-ii-differ-from-reg-nms-in-defining-best-execution/)
![Translucent circular elements represent distinct institutional liquidity pools and digital asset derivatives. A central arm signifies the Prime RFQ facilitating RFQ-driven price discovery, enabling high-fidelity execution via algorithmic trading, optimizing capital efficiency within complex market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-best-execution-framework.jpg)

MiFID II demands firms build a bespoke engine to prove execution quality; Reg NMS requires adherence to standardized network performance rules.

- 
### [How Do Best Execution Obligations Differ between Systematic Internalisers and Mtfs?](https://options.greeks.live/question/how-do-best-execution-obligations-differ-between-systematic-internalisers-and-mtfs/)
![A precision-engineered metallic cross-structure, embodying an RFQ engine's market microstructure, showcases diverse elements. One granular arm signifies aggregated liquidity pools and latent liquidity. The opposing perforated arm represents high-fidelity execution and algorithmic trading parameters. Its central pivot symbolizes atomic settlement within institutional digital asset derivatives.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-engine-microstructure-for-atomic-settlement.jpg)

Systematic Internalisers and MTFs possess distinct best execution duties rooted in their core operational models—bilateral principal versus multilateral agency—shaping strategic liquidity access.

- 
### [How Do Regulatory Mandates like MiFID II Shape a Firm’s Best Execution Policies?](https://options.greeks.live/question/how-do-regulatory-mandates-like-mifid-ii-shape-a-firms-best-execution-policies/)
![A sophisticated mechanism depicting the high-fidelity execution of institutional digital asset derivatives. It visualizes RFQ protocol efficiency, real-time liquidity aggregation, and atomic settlement within a prime brokerage framework, optimizing market microstructure for multi-leg spreads.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-protocol-execution-liquidity-aggregation-system.jpg)

MiFID II mandates a shift from subjective best effort to a data-driven, auditable system for proving superior execution outcomes.

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---

**Original URL:** https://options.greeks.live/question/how-do-systematic-internalisers-impact-best-execution-obligations-in-the-european-union/
