# How Does an Si's Order Execution Policy Directly Impact Its Regulatory Scrutiny? ▴ Question

**Published:** 2025-08-14
**Categories:** Question

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![A sleek conduit, embodying an RFQ protocol and smart order routing, connects two distinct, semi-spherical liquidity pools. Its transparent core signifies an intelligence layer for algorithmic trading and high-fidelity execution of digital asset derivatives, ensuring atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-execution-engine-bridging-diverse-liquidity-pools-via-high-fidelity-rfq-protocol-orchestration.jpg)

## Concept

![A sleek pen hovers over a luminous circular structure with teal internal components, symbolizing precise RFQ initiation. This represents high-fidelity execution for institutional digital asset derivatives, optimizing market microstructure and achieving atomic settlement within a Prime RFQ liquidity pool](https://options.greeks.live/wp-content/uploads/2025/07/optimizing-digital-asset-derivatives-rfq-through-prime-os-precision.jpg)

## The Policy as a Mirror

A [Systematic Internaliser](https://prime.greeks.live/area/systematic-internaliser/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)’s (SI) [order execution policy](https://prime.greeks.live/area/order-execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is the foundational document that dictates its interaction with client flow. It is the firm’s declared philosophy on how it will achieve the best possible result for its clients, codified into a set of operational procedures. This policy is far more than an internal guideline; it is a direct statement to regulators, articulating the firm’s interpretation and implementation of its legal and ethical obligations. Every trade executed under this policy generates a data point, and collectively, these points form a pattern.

Regulators are tasked with analyzing this pattern to determine if the firm’s actions align with its stated principles and with the overarching goals of market fairness, efficiency, and transparency mandated by frameworks like [MiFID II](https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The scrutiny an SI faces is therefore a direct reflection of the clarity, robustness, and verifiability of its [execution policy](https://prime.greeks.live/question/how-should-an-order-execution-policy-balance-the-need-for-information-control-against-the-duty-of-best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

The core of the matter lies in the principle of “[best execution](https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).” This is not a single, static target but a dynamic obligation that requires a firm to take all sufficient steps to obtain the optimal outcome for a client. The factors considered extend beyond mere price to include costs, speed, likelihood of execution and settlement, size, and any other relevant consideration. An SI’s execution policy must detail how it weighs these factors for different types of clients and financial instruments. This documented methodology becomes the benchmark against which its performance is judged.

A policy that is vague, internally inconsistent, or difficult to audit invites immediate and intense regulatory focus. Conversely, a policy that is precise, data-driven, and transparent in its logic provides a clear framework for compliance and a strong defense against regulatory challenges.

> A firm’s order execution policy is the blueprint for its market conduct, making it the primary document through which regulators assess its commitment to fair and orderly markets.

![Intricate core of a Crypto Derivatives OS, showcasing precision platters symbolizing diverse liquidity pools and a high-fidelity execution arm. This depicts robust principal's operational framework for institutional digital asset derivatives, optimizing RFQ protocol processing and market microstructure for best execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-microstructure-execution-system.jpg)

## From Internal Rulebook to External Signal

Under the MiFID II regime, the SI model was designed to bring activity that would otherwise occur in opaque, over-the-counter (OTC) arrangements into a more transparent framework. An SI deals on its own account, using its own capital to fill client orders. This bilateral engagement is permissible, but it comes with significant responsibilities. The execution policy is the mechanism that ensures this principal-based trading does not disadvantage the client.

It must explain, for example, how the prices quoted to clients are determined and how they relate to prevailing market prices on public venues. Does the SI reference a consolidated tape? Does it use its own internal valuation models? The policy must specify this. This transparency is crucial because it allows regulators to assess whether the SI is offering fair prices and potentially providing [price improvement](https://prime.greeks.live/area/price-improvement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) over what is available on lit markets.

The scrutiny intensifies because of the inherent conflict of interest. An SI is both the client’s counterparty and the entity responsible for ensuring that client’s best interest. The execution policy is the primary tool for managing this conflict. It must lay out objective, non-discriminatory criteria for how orders are handled.

For instance, the policy will dictate the circumstances under which an SI will execute an order internally versus routing it to another venue. It will also define the limits on the sizes of orders it is willing to handle. Regulators examine these rules to ensure that the SI’s decisions are governed by its commitment to the client’s best outcome, rather than by its own profitability or risk management needs. The data generated from every order ▴ executed or not ▴ becomes evidence of the policy in action, creating an indelible record for regulatory review.

![Interlocked, precision-engineered spheres reveal complex internal gears, illustrating the intricate market microstructure and algorithmic trading of an institutional grade Crypto Derivatives OS. This visualizes high-fidelity execution for digital asset derivatives, embodying RFQ protocols and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-execution-system.jpg)

![Precision-engineered modular components, with teal accents, align at a central interface. This visually embodies an RFQ protocol for institutional digital asset derivatives, facilitating principal liquidity aggregation and high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-institutional-digital-asset-derivatives-rfq-execution-interface-for-atomic-settlement.jpg)

## Strategy

![A central processing core with intersecting, transparent structures revealing intricate internal components and blue data flows. This symbolizes an institutional digital asset derivatives platform's Prime RFQ, orchestrating high-fidelity execution, managing aggregated RFQ inquiries, and ensuring atomic settlement within dynamic market microstructure, optimizing capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-trading-system-facilitating-high-fidelity-rfq-protocol-optimization-for-best-execution-and-atomic-settlement.jpg)

## The Strategic Calculus of Price Formation

The formulation of an [order execution](https://prime.greeks.live/question/how-do-smart-order-routers-decide-between-sending-an-order-to-an-exchange-versus-an-si/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) policy is a series of strategic decisions, each with direct consequences for regulatory perception. A primary strategic pillar is the methodology for [price formation](https://prime.greeks.live/area/price-formation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). An SI must decide how it will generate the quotes it provides to clients. This is a critical choice that balances commercial incentives with the regulatory mandate for fairness.

One common strategy is to derive quotes by referencing the prices available on primary trading venues, often referred to as the European Best Bid and Offer (EBBO) for equities. This approach provides a clear, defensible, and easily verifiable benchmark. A policy built on this strategy signals a commitment to transparency and simplifies the process of demonstrating price competitiveness to regulators. The data trail is straightforward ▴ the SI’s quote can be directly compared to the public market quote at the moment of execution.

A different strategy involves using internal, proprietary models to generate quotes. This can be particularly relevant for less liquid instruments where a reliable public price may not exist. While permissible, this strategy inherently increases the burden of proof. The execution policy must meticulously detail the inputs, assumptions, and governance around these models.

Regulators will scrutinize this methodology to ensure it is robust, consistently applied, and not designed to systematically disadvantage clients. The firm must be prepared to validate its models and demonstrate that the resulting prices are “fair” within the context of prevailing market conditions. This strategic path requires a significant investment in quantitative resources and compliance infrastructure to withstand regulatory examination.

The table below compares these two strategic approaches to price formation, highlighting the trade-offs that an SI’s management must consider.

| Pricing Strategy Attribute | Public Market Referencing | Internal Model-Based Pricing |
| --- | --- | --- |
| Regulatory Defensibility | High. Prices are anchored to a transparent, third-party benchmark. | Lower. Requires extensive documentation and model validation to prove fairness. |
| Operational Complexity | Low to Moderate. Requires real-time market data feeds and processing capabilities. | High. Demands significant quantitative expertise and robust model governance frameworks. |
| Applicability | Best suited for liquid instruments with continuous public price discovery. | Necessary for illiquid or OTC instruments without reliable public benchmarks. |
| Potential for Price Improvement | Clear. Price improvement is easily calculated as the difference from the public benchmark. | Complex. Demonstrating price improvement requires defining a “fair” price baseline first. |
| Associated Scrutiny | Focused on latency, slippage, and the consistency of providing better-than-benchmark prices. | Focused on model integrity, input data quality, and potential for conflicts of interest. |

![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)

## Orchestrating the Best Execution Framework

Beyond price, the execution policy must articulate a comprehensive strategy for delivering on the multi-faceted obligation of best execution. This involves defining the relative importance of various execution factors. For a retail client, the total consideration (price and costs) is paramount. For an institutional client executing a large order, the likelihood of execution and minimizing market impact might be more significant than achieving the absolute best price on a small portion of the order.

The policy must codify this logic. It should establish a clear hierarchy of execution factors for different client types and instrument classes. This documented strategy is what allows a firm to justify its execution decisions when reviewed by regulators.

> The strategy embedded in an execution policy must translate the abstract principle of “best execution” into a concrete, repeatable, and auditable process.

A critical component of this strategy is the selection and monitoring of execution venues. An SI may choose to execute orders on its own book, but its policy must also consider other venues (like regulated markets, MTFs, or other SIs) where it could achieve a better result for the client. The policy must outline the criteria for including a venue in its list of approved execution locations. Furthermore, it must detail the process for monitoring the [execution quality](https://prime.greeks.live/question/how-can-pre-trade-analytics-differentiate-between-high-quality-and-low-quality-quotes-in-an-rfq-auction/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) of these venues on an ongoing basis.

This is not a “set and forget” exercise. Regulators expect to see evidence of a dynamic review process, where the SI regularly assesses whether its chosen venues continue to provide the best possible outcomes. This strategic monitoring, often evidenced through [Transaction Cost Analysis](https://prime.greeks.live/area/transaction-cost-analysis/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (TCA), demonstrates a proactive approach to compliance and is a key focus during regulatory audits. The absence of such a documented, evidence-based monitoring strategy is a significant red flag.

The following list outlines the core elements a regulator would expect to see in the strategic framework of an execution policy:

- **Client Categorization** ▴ A clear definition of how clients are classified (e.g. retail, professional) and how this classification impacts the application of the execution policy.

- **Factor Weighting** ▴ A detailed explanation of the relative importance assigned to execution factors (price, costs, speed, likelihood of execution, etc.) for each class of financial instrument and client type.

–

- **Venue Selection Criteria** ▴ Objective criteria used to select the execution venues included in the policy, demonstrating how they contribute to achieving the best possible result.

- **Monitoring and Review Process** ▴ A description of the procedures for regularly monitoring the effectiveness of the policy and the execution quality of the chosen venues, including the specific metrics and data sources used.

- **[Conflict of Interest Management](https://prime.greeks.live/area/conflict-of-interest-management/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)** ▴ A clear articulation of how the firm identifies and manages the conflicts of interest inherent in acting as a principal, ensuring client interests are prioritized. 

![A cutaway view reveals an advanced RFQ protocol engine for institutional digital asset derivatives. Intricate coiled components represent algorithmic liquidity provision and portfolio margin calculations](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocol-engine-digital-asset-derivatives-core-internal-mechanism-visualized.jpg)

![A smooth, light-beige spherical module features a prominent black circular aperture with a vibrant blue internal glow. This represents a dedicated institutional grade sensor or intelligence layer for high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-intelligence-layer-for-optimal-digital-asset-rfq-execution.jpg)

## Execution

![A sleek, white, semi-spherical Principal's operational framework opens to precise internal FIX Protocol components. A luminous, reflective blue sphere embodies an institutional-grade digital asset derivative, symbolizing optimal price discovery and a robust liquidity pool](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-high-fidelity-execution-5.jpg)

## The Anatomy of a Trade and Its Digital Footprint

The operational execution of an order by a Systematic Internaliser creates an immutable data trail that serves as the primary evidence for regulatory assessment. Every step, from the moment a client’s request for a quote arrives to the final post-trade report, is time-stamped and logged. This digital footprint is what allows regulators to reconstruct the trading process and test it against the promises made in the execution policy. The policy, therefore, must be designed with this forensic analysis in mind.

It must ensure that the firm’s systems capture the necessary data points with sufficient granularity. For example, under MiFID II, clock synchronization requirements mean that timestamps must be accurate to the microsecond level, allowing for precise sequencing of events.

When an order is received, the SI’s systems must first consult the execution policy to determine the handling procedure. If the policy dictates that the SI will provide a quote, the system logs the client request, generates a quote based on the policy’s pricing methodology (e.g. referencing the EBBO plus or minus a spread), and records the exact time the quote is sent to the client. If the client accepts, the system logs the acceptance time and the execution time. This sequence allows for a precise calculation of execution latency, a key metric of quality.

The system must also capture the prevailing market price at the time of execution to calculate any price improvement offered to the client. This entire workflow, from data capture to execution logic, is a direct implementation of the policy and is what regulators will audit.

![A sleek, disc-shaped system, with concentric rings and a central dome, visually represents an advanced Principal's operational framework. It integrates RFQ protocols for institutional digital asset derivatives, facilitating liquidity aggregation, high-fidelity execution, and real-time risk management](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocol-engine-digital-asset-derivatives-execution.jpg)

## Quantitative Expressions of Execution Quality

[Regulatory scrutiny](https://prime.greeks.live/area/regulatory-scrutiny/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is increasingly quantitative. Regulators do not just read the policy; they analyze the data produced by its execution to measure performance. The policy must be designed to generate data that clearly demonstrates compliance with best execution obligations.

This data is often summarized in reports like the (now suspended but still influential) [RTS 27](https://prime.greeks.live/area/rts-27/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and the annual [RTS 28](https://prime.greeks.live/area/rts-28/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) reports, which provide aggregated statistics on execution quality. An SI must have the infrastructure to not only produce these reports but also to perform its own internal, high-frequency analysis of its execution quality.

The following table provides a simplified example of a price improvement report that an SI would use internally and that a regulator would examine. It quantifies the value delivered to clients by executing at prices better than the public benchmark, a core tenet of many SI execution policies.

| Trade ID | Instrument | Time of Execution (UTC) | EBBO at Execution | SI Execution Price | Price Improvement (bps) |
| --- | --- | --- | --- | --- | --- |
| T-12345 | VOD.L | 14:30:05.123456 | 100.50 / 100.52 | 100.51 | 1.0 |
| T-12346 | AZN.L | 14:31:10.987654 | 8450.00 / 8452.00 | 8450.50 | 0.6 |
| T-12347 | VOD.L | 14:32:15.555555 | 100.51 / 100.53 | 100.52 | 1.0 |
| T-12348 | BARC.L | 14:33:02.345678 | 152.10 / 152.14 | 152.11 | 1.3 |

This kind of granular, quantitative evidence is the most powerful tool an SI has to demonstrate the effectiveness of its execution policy. A regulator can see, on a trade-by-trade basis, how the SI is performing against its stated goal of providing competitive prices. The policy must ensure that this data is captured accurately and is readily available for analysis.

> The data generated by an SI’s execution systems does not just support the policy; in the eyes of a regulator, it is the policy in practice.

![An opaque principal's operational framework half-sphere interfaces a translucent digital asset derivatives sphere, revealing implied volatility. This symbolizes high-fidelity execution via an RFQ protocol, enabling private quotation within the market microstructure and deep liquidity pool for a robust Crypto Derivatives OS](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-13.jpg)

## The Public Commitment of Regulatory Reporting

The final stage of execution is reporting. An SI has obligations for both post-trade transparency (reporting trades to the public) and transaction reporting (reporting detailed trade data to regulators). The execution policy directly governs what is reported.

For instance, the policy’s rules on how to handle large-in-scale orders will determine whether a trade benefits from a deferred publication waiver. Inconsistent application of these waivers, or a policy that appears to abuse them to reduce transparency, will attract negative attention.

The annual RTS 28 report is a particularly critical document. In this report, the firm must summarize the analysis and conclusions from its monitoring of execution quality and list its top five execution venues by volume for each instrument class. This report is a public declaration. It forces the SI to stand behind the strategy outlined in its execution policy with concrete data.

If a policy states that the firm prioritizes price and its RTS 28 report shows it routes significant volume to a venue with poor price performance but perhaps other benefits (like high rebates), it creates a clear contradiction that regulators will question. The execution policy and the RTS 28 report must tell the same story. A coherent narrative, backed by robust data from the execution process, is the foundation of a defensible position under intense regulatory scrutiny.

![Abstract depiction of an advanced institutional trading system, featuring a prominent sensor for real-time price discovery and an intelligence layer. Visible circuitry signifies algorithmic trading capabilities, low-latency execution, and robust FIX protocol integration for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-high-fidelity-rfq-protocols.jpg)

## References

- IOSCO Technical Committee. (2013). _Regulatory Issues Raised by Changes in Market Structure_. Final Report.

- European Securities and Markets Authority. (2015). _Final Report ▴ Draft Regulatory and Implementing Technical Standards MiFID II/MiFIR_. ESMA/2015/1464.

- Financial Conduct Authority. (2014). _Best execution and payment for order flow_. Thematic Review TR14/13.

- Hill, Andy. (2016). _MiFID II/R Fixed Income Best Execution Requirements ▴ RTS 27 & 28_. International Capital Market Association.

- Mizuho International plc. (2024). _Order Execution Policy Disclosure Statement for Professional Clients_.

- Norton Rose Fulbright. (2017). _Best Execution Under MiFID II_.

- PwC Legal. (2024). _MiFIR/MiFID II Review ▴ making sense of the key amendments_.

- SmartStream Technologies. (2017). _Systematic Internalisation Under MiFID II ▴ What’s Needed Now_. White Paper.

- Ashurst. (2024). _EU changes to the MIFID regime are here_. Briefing.

- International Capital Market Association. (2017). _MiFID II SI Regime Workshops ▴ A summary report_.

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## Reflection

![Interconnected translucent rings with glowing internal mechanisms symbolize an RFQ protocol engine. This Principal's Operational Framework ensures High-Fidelity Execution and precise Price Discovery for Institutional Digital Asset Derivatives, optimizing Market Microstructure and Capital Efficiency via Atomic Settlement](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-high-fidelity-execution.jpg)

## The Policy as a System of Governance

An order execution policy transcends its function as a mere compliance document. It should be viewed as the central processing unit of a firm’s trading governance system. Its parameters define the ethical and operational boundaries within which the firm operates, and the data it produces provides the feedback loop for continuous assessment and refinement. The level of regulatory scrutiny a Systematic Internaliser endures is ultimately a measure of the integrity of this system.

A well-architected policy is not a defense against scrutiny, but a tool that welcomes it, confident in the logic and evidence it produces. It demonstrates that the firm’s commercial objectives are pursued in a manner that reinforces, rather than undermines, the health and transparency of the market ecosystem.

Ultimately, the dialogue between a firm and its regulator is a dialogue about process. The execution policy is the language in which that process is described. A firm that masters this language ▴ by building a policy that is clear, evidence-based, and dynamically managed ▴ can navigate the complex regulatory environment with assurance. It transforms an obligation into a demonstration of operational excellence.

The challenge for any SI is to see its policy not as a static shield, but as a dynamic engine of verifiable integrity. This is the core of a resilient and trusted market presence.

![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)

## Glossary

<a href="https://prime.greeks.live/area/systematic-internaliser/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A dual-toned cylindrical component features a central transparent aperture revealing intricate metallic wiring. This signifies a core RFQ processing unit for Digital Asset Derivatives, enabling rapid Price Discovery and High-Fidelity Execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-core-best-execution-prime-os.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/order-execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An exposed institutional digital asset derivatives engine reveals its market microstructure. The polished disc represents a liquidity pool for price discovery](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-digital-asset-derivatives-rfq-execution-system.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/question/how-should-an-order-execution-policy-balance-the-need-for-information-control-against-the-duty-of-best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A cutaway reveals the intricate market microstructure of an institutional-grade platform. Internal components signify algorithmic trading logic, supporting high-fidelity execution via a streamlined RFQ protocol for aggregated inquiry and price discovery within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-execution-for-digital-asset-derivatives-via-rfq-protocols.jpg)

## Execution Policy

An Order Execution Policy architects the trade-off between information control and best execution to protect value while seeking liquidity. </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 sleek, futuristic institutional grade platform with a translucent teal dome signifies a secure environment for private quotation and high-fidelity execution. A dark, reflective sphere represents an intelligence layer for algorithmic trading and price discovery within market microstructure, ensuring capital efficiency for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-rfq-execution-for-institutional-digital-asset-derivatives-1.jpg)

## Mifid Ii

Meaning ▴ MiFID II, the Markets in Financial Instruments Directive II, constitutes a comprehensive regulatory framework enacted by the European Union to govern financial markets, investment firms, and trading venues. </a><a href="https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An abstract composition of interlocking, precisely engineered metallic plates represents a sophisticated institutional trading infrastructure. Visible perforations within a central block symbolize optimized data conduits for high-fidelity execution and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-multi-leg-execution-layer.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/price-improvement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A translucent blue algorithmic execution module intersects beige cylindrical conduits, exposing precision market microstructure components. This institutional-grade system for digital asset derivatives enables high-fidelity execution of block trades and private quotation via an advanced RFQ protocol, ensuring optimal capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-core-execution-architecture-intelligence-layer.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/question/how-do-smart-order-routers-decide-between-sending-an-order-to-an-exchange-versus-an-si/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Symmetrical, engineered system displays translucent blue internal mechanisms linking two large circular components. This represents an institutional-grade Prime RFQ for digital asset derivatives, enabling RFQ protocol execution, high-fidelity execution, price discovery, dark liquidity management, and atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-prime-os-core.jpg)

## Order Execution

A Smart Order Router optimizes for best execution by routing orders to the venue offering the superior net price, balancing exchange transparency with SI price improvement. </a><a href="https://prime.greeks.live/area/price-formation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Two distinct, polished spherical halves, beige and teal, reveal intricate internal market microstructure, connected by a central metallic shaft. This embodies an institutional-grade RFQ protocol for digital asset derivatives, enabling high-fidelity execution and atomic settlement across disparate liquidity pools for principal block trades](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-high-fidelity-execution-prime-os.jpg)

## Price Formation

Meaning ▴ Price formation refers to the dynamic, continuous process by which the equilibrium value of a financial instrument is established through the interaction of supply and demand within a market system. </a><a href="https://prime.greeks.live/question/how-can-pre-trade-analytics-differentiate-between-high-quality-and-low-quality-quotes-in-an-rfq-auction/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A detailed cutaway of a spherical institutional trading system reveals an internal disk, symbolizing a deep liquidity pool. A high-fidelity probe interacts for atomic settlement, reflecting precise RFQ protocol execution within complex market microstructure for digital asset derivatives and Bitcoin options](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-microstructure-revealed.jpg)

## Execution Quality

Pre-trade analytics differentiate quotes by systematically scoring counterparty reliability and predicting execution quality beyond price. </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">
![Precision metallic component, possibly a lens, integral to an institutional grade Prime RFQ. Its layered structure signifies market microstructure and order book dynamics](https://options.greeks.live/wp-content/uploads/2025/08/high-fidelity-institutional-digital-asset-rfq-execution-engine.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/conflict-of-interest-management/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Internal, precise metallic and transparent components are illuminated by a teal glow. This visual metaphor represents the sophisticated market microstructure and high-fidelity execution of RFQ protocols for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-microstructure-prime-os-intelligence-layer-atomic-settlement-precision.jpg)

## Conflict of Interest Management

Meaning ▴ Conflict of Interest Management defines a rigorous systemic framework designed to identify, mitigate, and transparently manage situations where an entity's multiple roles or vested interests could compromise the integrity of its actions or the fairness of transactions within institutional digital asset markets. </a><a href="https://prime.greeks.live/area/regulatory-scrutiny/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, open system showcases modular architecture, embodying an institutional-grade Prime RFQ for digital asset derivatives. Distinct internal components signify liquidity pools and multi-leg spread capabilities, ensuring high-fidelity execution via RFQ protocols for price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-modularity-unveiled.jpg)

## Regulatory Scrutiny

Meaning ▴ Regulatory Scrutiny refers to the systematic examination and oversight exercised by governing bodies and financial authorities over institutional participants and their operational frameworks within digital asset markets. </a><a href="https://prime.greeks.live/area/rts-27/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision-engineered components of an institutional-grade system. The metallic teal housing and visible geared mechanism symbolize the core algorithmic execution engine for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-institutional-digital-asset-derivatives-rfq-execution-layer.jpg)

## Rts 27

Meaning ▴ RTS 27 mandates that investment firms and market operators publish detailed data on the quality of execution of transactions on their venues. </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 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)

## 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:** [RTS 27](https://options.greeks.live/area/rts-27/), [Order Execution Policy](https://options.greeks.live/area/order-execution-policy/), [Price Formation](https://options.greeks.live/area/price-formation/), [Systematic Internaliser](https://options.greeks.live/area/systematic-internaliser/), [Execution Venue Analysis](https://options.greeks.live/area/execution-venue-analysis/), [MiFID II](https://options.greeks.live/area/mifid-ii/)	

## Discover More

- 
### [How Does Mifid Ii Best Execution Redefine Vendor Selection Criteria?](https://options.greeks.live/question/how-does-mifid-ii-best-execution-redefine-vendor-selection-criteria/)
![Central, interlocked mechanical structures symbolize a sophisticated Crypto Derivatives OS driving institutional RFQ protocol. Surrounding blades represent diverse liquidity pools and multi-leg spread components. This visualizes high-fidelity execution, precise price discovery, and algorithmic trading within complex market microstructure, optimizing capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-architecture-optimizing-high-fidelity-execution-across-diverse-liquidity-pools.jpg)

MiFID II transforms vendor selection into a quantitative discipline, demanding an auditable, data-driven architecture to prove best execution.

- 
### [How Does MiFID II Specifically Impact RFQ Best Execution Policies?](https://options.greeks.live/question/how-does-mifid-ii-specifically-impact-rfq-best-execution-policies/)
![Two sharp, teal, blade-like forms crossed, featuring circular inserts, resting on stacked, darker, elongated elements. This represents intersecting RFQ protocols for institutional digital asset derivatives, illustrating multi-leg spread construction and high-fidelity execution. The underlying layers signify aggregated liquidity pools and market microstructure dynamics, enabling price discovery and capital efficiency within a Prime RFQ framework.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-best-execution.jpg)

MiFID II mandates a shift to "all sufficient steps" for RFQ best execution, requiring data-driven policies and transparent reporting.

- 
### [How Does MiFID II Define the Best Execution Obligations for SIs?](https://options.greeks.live/question/how-does-mifid-ii-define-the-best-execution-obligations-for-sis/)
![Abstract forms depict institutional liquidity aggregation and smart order routing. Intersecting dark bars symbolize RFQ protocols enabling atomic settlement for multi-leg spreads, ensuring high-fidelity execution and price discovery of digital asset derivatives.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-high-fidelity-execution-2.jpg)

MiFID II obligates SIs to build a data-driven system proving their execution is the best possible client outcome.

- 
### [How Should a Buy-Side Firm’s Best Execution Policy Document the Use of Systematic Internalisers?](https://options.greeks.live/question/how-should-a-buy-side-firms-best-execution-policy-document-the-use-of-systematic-internalisers/)
![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)

A firm's policy must architect a data-driven system proving SI use delivers superior, auditable execution outcomes.

- 
### [How Does MiFID II Define Best Execution for Non-Equity Asset Classes?](https://options.greeks.live/question/how-does-mifid-ii-define-best-execution-for-non-equity-asset-classes/)
![Intricate metallic mechanisms portray a proprietary matching engine or execution management system. Its robust structure enables algorithmic trading and high-fidelity execution for institutional digital asset derivatives. Interconnecting lines signify FIX protocol data flow and RFQ protocol pathways vital for price discovery.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-market-microstructure.jpg)

MiFID II defines non-equity best execution as a mandate to build a data-driven system proving the best client outcome was sought.

- 
### [How Can a Firm Quantitatively Prove Best Execution When Using a Systematic Internaliser?](https://options.greeks.live/question/how-can-a-firm-quantitatively-prove-best-execution-when-using-a-systematic-internaliser/)
![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. This Prime RFQ architecture enables high-fidelity execution, optimizing multi-leg spread strategies and capital efficiency.](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)

Proving best execution for a Systematic Internaliser requires a data architecture that quantitatively validates bilateral trades against public market benchmarks.

- 
### [How Do SIs Alter the Calculation of Best Execution under MiFID II?](https://options.greeks.live/question/how-do-sis-alter-the-calculation-of-best-execution-under-mifid-ii/)
![A dynamic central nexus of concentric rings visualizes Prime RFQ aggregation for digital asset derivatives. Four intersecting light beams delineate distinct liquidity pools and execution venues, emphasizing high-fidelity execution and precise price discovery. This represents advanced market microstructure for institutional-grade trading.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-hub-for-digital-asset-derivatives-execution.jpg)

SIs restructure best execution by injecting firm, bilateral quote data into a framework previously dominated by public, multilateral venues.

- 
### [How Do Regulatory Frameworks like MiFID II Impact Venue Selection Strategy?](https://options.greeks.live/question/how-do-regulatory-frameworks-like-mifid-ii-impact-venue-selection-strategy/)
![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. Surrounding elements denote Market Microstructure and High-Fidelity Execution pathways for Block Trades, ensuring Best Execution within a Prime RFQ framework.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-visualizing-microstructure.jpg)

MiFID II transforms venue selection into a data-driven, systematic process for evidencing the best possible multi-factor execution outcome.

- 
### [How Do Rts 27 and Rts 28 Reports Interact to Ensure Best Execution Compliance?](https://options.greeks.live/question/how-do-rts-27-and-rts-28-reports-interact-to-ensure-best-execution-compliance/)
![A precision-engineered institutional digital asset derivatives execution system cutaway. The teal Prime RFQ casing reveals intricate market microstructure. Bright blue internal elements represent dynamic liquidity pools, enabling high-fidelity execution and efficient RFQ protocols for multi-leg spread strategies.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-protocol-core-engine.jpg)

RTS 27 and RTS 28 interact as a data feedback loop, where public venue performance data (RTS 27) informs and substantiates a firm's execution choices reported to clients (RTS 28).

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---

**Original URL:** https://options.greeks.live/question/how-does-an-sis-order-execution-policy-directly-impact-its-regulatory-scrutiny/
