# How Does the MiFID II Tick Size Regime Specifically Alter SI Quoting and Price Improvement? ▴ Question

**Published:** 2025-08-16
**Categories:** Question

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## Concept

The Markets in Financial Instruments Directive II (MiFID II) introduced a granular framework of operational protocols intended to standardize European equity market structures. A central component of this framework is the tick size regime, a set of rules defining the minimum price increment for quotes and orders on trading venues. The regime’s application to [Systematic Internalisers](https://prime.greeks.live/question/how-do-systematic-internalisers-alter-european-liquidity-dynamics-compared-to-us-sdp/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (SIs) fundamentally re-calibrated the mechanics of off-venue quoting and the possibilities for [price improvement](https://prime.greeks.live/area/price-improvement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), moving the market toward a more harmonized, albeit constrained, execution landscape.

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## The Regulatory Asymmetry at Inception

Upon the initial implementation of [MiFID II](https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), a significant asymmetry existed in the application of the [tick size regime](https://prime.greeks.live/area/tick-size-regime/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). Regulated Markets (RMs) and Multilateral Trading Facilities (MTFs) were mandated to adhere to the harmonized tick sizes outlined in Regulatory Technical Standard (RTS) 1. This directive was designed to create an orderly market, preventing a “race to the bottom” where venues would compete by offering infinitesimally small price increments, which could fragment liquidity and degrade market depth.

Systematic Internalisers, however, were not initially bound by the same constraints. Their primary obligation was to ensure their quotes reflected the “prevailing market conditions,” a less precise standard that allowed for greater flexibility in pricing.

This discrepancy created a structural advantage for SIs. Operating outside the tick size constraints of lit venues, an SI could offer a price that was marginally better than the best bid or offer (BBO) on the primary exchange, often by a fraction of a standard tick. For a client’s [Smart Order Router](https://prime.greeks.live/area/smart-order-router/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (SOR), an offer to buy a stock at €10.001 when the best bid on the [lit market](https://prime.greeks.live/area/lit-market/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) was €10.000 was technically a better price. This capability allowed SIs to attract a significant volume of order flow, particularly for small to medium-sized orders that were sensitive to even the smallest price enhancements.

> The initial MiFID II framework created a bifurcated system where lit venues were bound by rigid price steps, while Systematic Internalisers could operate in the fractional spaces between those steps.

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## Systematic Internalisers and Price Improvement Defined

Understanding the alteration requires a precise definition of the entities and mechanics involved. A [Systematic Internaliser](https://prime.greeks.live/area/systematic-internaliser/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) 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, an MTF, or an OTF. The SI acts as the counterparty to its client’s trade, using its own capital to complete the transaction.

- **Quoting Obligation** ▴ For liquid equities, SIs are required to provide firm, two-way quotes for transactions up to a [Standard Market Size](https://prime.greeks.live/area/standard-market-size/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (SMS). This pre-trade transparency is a core tenet of MiFID II, designed to make SI liquidity visible to the market.

- **Price Improvement** ▴ This is the practice of executing a client’s order at a price more favorable than the current BBO on the reference market. For a buy order, this means executing at a price lower than the best offer; for a sell order, it means executing at a price higher than the best bid. Price improvement is a key value proposition for off-venue execution venues like SIs.

The initial regulatory gap allowed SIs to engineer price improvement in sub-tick increments. This practice, while beneficial to the end client on a per-trade basis, raised concerns among regulators and venue operators about the overall health of the [price formation](https://prime.greeks.live/area/price-formation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) process. They argued that SIs were effectively “free-riding” on the price discovery occurring on lit markets without contributing to it, potentially drawing valuable, uninformed order flow away from the central limit order books and impairing [market 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). 

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## The Harmonization Mandate

In response to these concerns, the European Securities and Markets Authority ([ESMA](https://prime.greeks.live/area/esma/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)) moved to level the playing field. Through a series of consultations and amendments, ESMA clarified its position ▴ for price improvement to be considered meaningful and justified, it should align with the minimum [tick size](https://prime.greeks.live/area/tick-size/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This led to a formal extension of the tick size regime to SIs, which came into effect on June 26, 2020. This change mandated that SI quotes, and the execution prices derived from them, must adhere to the same price increments applicable on RMs and MTFs.

The alteration was profound, as it directly targeted the primary mechanism SIs had used to compete for [order flow](https://prime.greeks.live/area/order-flow/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The system of bilateral, off-venue execution was now integrated into the same pricing grid as the public, multilateral venues, forcing a fundamental strategic rethink for all SIs.

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## Strategy

The extension of the MiFID II tick size regime to Systematic Internalisers was a direct intervention in the competitive dynamics of European equity markets. It compelled a strategic pivot, forcing SIs to redesign their value proposition away from marginal, sub-tick pricing advantages and toward a more structured and rule-bound framework for delivering [execution quality](https://prime.greeks.live/area/execution-quality/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The core strategic challenge became how to provide meaningful price improvement when the very definition of “price” was now constrained to discrete, non-negotiable increments.

![A precision mechanism with a central circular core and a linear element extending to a sharp tip, encased in translucent material. This symbolizes an institutional RFQ protocol's market microstructure, enabling high-fidelity execution and price discovery for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-institutional-digital-asset-derivatives-rfq-execution-engine-microstructure-facilitating-optimal-price-discovery-and-best-execution.jpg)

## From Sub-Tick Competition to Full-Tick Value

The pre-amendment environment fostered a strategy of micro-arbitrage for SIs. Their quoting engines were calibrated to offer a price that was mathematically better, yet structurally insignificant, than the lit market BBO. A typical SOR, programmed to seek any price improvement, would automatically route to the SI, capturing this fractional benefit for the end client. The SI’s strategy was one of high-volume aggregation, profiting from the bid-ask spread on a massive number of trades captured through this pricing advantage.

The post-amendment reality rendered this model obsolete. With SI quotes now locked to the same pricing grid as [lit venues](https://prime.greeks.live/area/lit-venues/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), the ability to offer a price of €10.001 against a lit market offer of €10.002 (with a €0.01 tick) vanished. The new strategic imperative shifted from offering any price improvement to offering [compliant price improvement](https://prime.greeks.live/question/what-are-the-key-architectural-differences-between-a-compliant-and-a-non-compliant-rfq-platform/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This fundamentally altered the SI’s operational logic and its relationship with client order flow.

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## Recalibrating the Price Improvement Calculus

Under the harmonized regime, SIs had to re-evaluate how and when they could offer superior pricing. Their strategic options narrowed to a few primary channels, each with distinct implications for their business model and risk management.

- **[Mid-Point Execution](https://prime.greeks.live/question/what-are-the-security-implications-of-a-public-facing-rest-api-versus-a-point-to-point-fix-connection/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)** ▴ This became the most significant channel for providing compliant price improvement. By executing an order at the mid-point of the BBO, an SI could offer a price that was half a spread better for both the buyer and the seller. For a stock quoted at €10.00 / €10.02, a mid-point execution at €10.01 provides a full tick of price improvement relative to crossing the spread. This strategy is most effective when the spread is two or more ticks wide, as it provides a clear and “meaningful” benefit as defined by regulators. The focus for SIs shifted to identifying and capturing opportunities to internalize flow where a stable mid-point was available.

- **Full-Tick Improvement** ▴ When an SI is willing to offer a price that is at least one full tick size better than the BBO, it can still provide a compelling reason for order flow to route to it. For example, if the BBO is €10.00 / €10.02, an SI could choose to buy from a client at €10.01, a full tick better than the best bid. This is a more aggressive strategy, as it involves the SI taking on more risk by stepping across the mid-point. It is typically employed when the SI has a pre-existing axe (a desire to buy or sell a particular stock) or when it is confident in its ability to manage the resulting inventory.

- **Size-Contingent Improvement** ▴ The tick size obligations apply most strictly to quotes up to the Standard Market Size. For larger orders, particularly those classified as Large-in-Scale (LIS), SIs retain greater flexibility. A key strategy for SIs became segmenting their client flow and developing specialized handling for block orders. For LIS trades, SIs can negotiate prices with clients that may fall between ticks, as these trades are exempt from many pre-trade transparency rules and do not impact the public BBO in the same way. This allows SIs to function more like traditional block trading desks for institutional clients, providing bespoke liquidity solutions.

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## The Impact on Liquidity Provision and Market Dynamics

The strategic shift had broader implications for the market ecosystem. By constraining the ability of SIs to offer marginal price improvements, the regime aimed to redirect more “uninformed” retail and algorithmic order flow back to lit venues, where it could contribute to price discovery. This was intended to strengthen the central limit order book and create a more robust market.

> The harmonization of tick sizes forced Systematic Internalisers to transition from a model of capturing flow through pricing loopholes to one of competing on the basis of genuine liquidity and risk appetite.

For SIs, the new environment demanded a more sophisticated approach to risk and inventory management. They could no longer rely on a simple price-matching algorithm. Instead, they needed to develop more advanced models to determine when to offer mid-point execution, when to provide aggressive full-tick improvement, and how to price large blocks of risk. This change favored SIs with significant capital, advanced technological infrastructure, and sophisticated quantitative capabilities.

The table below outlines the strategic shift in the SI value proposition before and after the tick size regime harmonization.

| Strategic Dimension | Pre-Amendment SI Strategy (Pre-June 2020) | Post-Amendment SI Strategy (Post-June 2020) |
| --- | --- | --- |
| Primary Competitive Advantage | Offering marginal, sub-tick price improvement to attract SOR flow. | Providing compliant mid-point or full-tick price improvement; bespoke liquidity for large orders. |
| Quoting Logic | Quote at any price increment that reflects “prevailing market conditions.” | Quotes must adhere to the harmonized tick size grid of the primary market. |
| Target Order Flow | Broad capture of all order flow sensitive to any level of price improvement. | Segmented approach ▴ targeting retail/algo flow with mid-point execution and institutional flow with LIS block services. |
| Technology Focus | Low-latency price matching and sub-tick quoting engines. | Sophisticated risk management systems, algorithms for identifying mid-point opportunities, and LIS handling logic. |
| Regulatory Positioning | Leveraging the asymmetry between SI and venue obligations. | Operating within a leveled playing field, competing on capital, risk appetite, and service quality. |

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## Execution

The operational execution of quoting and price improvement by a Systematic Internaliser under the MiFID II tick size regime is a process governed by precise quantitative constraints. The regime’s extension to SIs required a complete re-engineering of their execution systems, from the logic of their Smart Order Routers and quoting engines to the very definition of a “better” price. The mechanics of execution are no longer a matter of simple price comparison but a complex decision-making process within a discrete and rigid pricing structure.

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## The Operational Playbook for Compliant Quoting

An SI’s quoting engine must follow a strict, multi-step procedure to process an incoming client order and provide a compliant execution. This process integrates real-time market data with the static rule set of the tick size regime.

- **Ingest Reference Price Data** ▴ The system continuously receives the National Best Bid and Offer (NBBO) from the most relevant market in terms of liquidity (the reference venue).

- **Determine Applicable Tick Size** ▴ For the specific instrument, the system retrieves the mandatory minimum tick size from its internal database, which is based on ESMA’s [RTS 1](https://prime.greeks.live/area/rts-1/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) tables. This value is determined by the instrument’s price and liquidity band (based on its Average Daily Number of Transactions).

- **Validate the Spread** ▴ The system calculates the current spread in terms of ticks. This is a critical step, as the width of the spread dictates the available options for price improvement. A spread of one tick offers very different possibilities than a spread of five ticks.

- **Apply Price Improvement Logic** ▴ Based on the firm’s strategy and the validated spread, the engine determines the execution price.

<li>If the spread is two or more ticks wide, the engine may default to offering the **mid-point price**.

- If the SI has a specific trading interest (an axe), it may offer a **full-tick improvement**, executing at a price one tick inside the NBBO.

- If the spread is only one tick wide, the only compliant price improvement possible is at the **mid-point**, which itself may not be a valid tick increment. In such cases, true price improvement inside the spread is often impossible without violating the tick regime.

</li>
- **Generate and Disseminate Quote** ▴ The calculated firm quote is then made public for liquid instruments (if the order is below SMS) and communicated to the client for execution. The execution price must be on the tick size grid.

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## Quantitative Modeling of Execution Scenarios

The practical impact of the regime is best illustrated through concrete scenarios. The following table demonstrates how an SI’s execution decision changes based on market conditions and the constraints of the tick size regime. We assume a stock with a tick size of €0.01, as determined by its price and liquidity profile.

| Scenario | Reference BBO | Spread (in Ticks) | Client Order | Pre-Amendment Execution (Possible Price) | Post-Amendment Compliant Execution Options | Resulting Price Improvement |
| --- | --- | --- | --- | --- | --- | --- |
| Wide Spread | €20.50 / €20.54 | 4 | Buy 500 shares | €20.539 | €20.52 (Mid-Point) or €20.53 (Full-Tick) | €0.02 or €0.01 per share |
| Standard Spread | €15.20 / €15.22 | 2 | Sell 1000 shares | €15.201 | €15.21 (Mid-Point) | €0.01 per share |
| Minimum Spread | €50.10 / €50.11 | 1 | Buy 200 shares | €50.109 | €50.11 (No Improvement Possible at a better price) | €0.00 per share |
| Aggressive Offer | €33.45 / €33.47 | 2 | Sell 800 shares | €33.455 | €33.46 (Mid-Point) or €33.46 (Full-Tick from SI perspective) | €0.01 per share |

This quantitative analysis reveals a critical outcome of the regime ▴ the possibility of price improvement is now directly coupled to the width of the bid-ask spread. When spreads are wide, SIs have ample room to offer meaningful, compliant improvement. However, in highly liquid stocks where the spread is frequently just one tick, the ability of SIs to provide price improvement is severely curtailed. This was a deliberate outcome of the regulation, designed to ensure that any price improvement offered is economically significant.

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## Systemic Impact and Unintended Consequences

While the goal of the tick size harmonization was to level the playing field and enhance lit market price discovery, the actual impact on market quality has been complex. Research conducted on the implementation of the SI tick size regime has uncovered some potentially unintended consequences.

> The rigid, grid-like structure imposed by the tick size regime has, in some cases, led to wider effective spreads and increased transaction costs for end investors.

A study analyzing the Swedish stock market found that after the SI tick size regime was implemented, market quality on the lit exchange (Nasdaq Stockholm) actually worsened. The findings included:

- **Increased Spreads** ▴ Both quoted and effective spreads widened on the lit market.

- **Higher Price Impact** ▴ The cost of executing large, impatient orders increased.

The study suggests a possible explanation ▴ by removing the ability of SIs to offer marginal price improvement, some informed or impatient traders, who previously would have routed to SIs to minimize their footprint, were forced back onto the lit market. Their more aggressive trading style may have contributed to higher volatility and wider spreads, ultimately increasing costs for all market participants. A report from the French Autorité des marchés financiers (AMF) noted that, prior to the regime’s extension, a substantial portion of SI trading volume (nearly 40%) occurred at prices that would become non-compliant, highlighting the scale of the adjustment required. This indicates that the system has not simply shifted to a new equilibrium but has undergone a fundamental change in its internal dynamics, with complex effects on liquidity and overall execution costs.

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## References

- Deutsche Bank. (2017). MiFID II ▴ Systematic Internalisers ▴ Tick Sizes and Price Improvement. Autobahn.

- Deutsche Bank. (2018). MiFID II ▴ Systematic Internalisers ▴ Tick Sizes and Price Improvement ▴ Responses to ESMA Consultation. Autobahn.

- Emissions-EUETS.com. (2017). MiFID II tick-size regime.

- Foley, S. Karlson, A. & Sjöberg, F. (2022). Does the tick size regime on systematic internalisers improve market quality? (Master’s thesis, Stockholm School of Economics). DiVA portal.

- Autorité des marchés financiers. (2020). Quantifying systematic internalisers’ activity ▴ their share in the equity market structure and role.

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## Reflection

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## The System’s New Equilibrium

The integration of Systematic Internalisers into the harmonized tick size regime represents more than a regulatory adjustment; it is a recalibration of a core market protocol. The change forces a re-evaluation of how execution quality is defined and achieved. The prior system allowed for a fluid, continuous model of price improvement, whereas the current structure imposes a discrete, grid-based logic. This compels market participants to consider the architectural implications for their own trading frameworks.

Is an execution strategy optimized for capturing fractional price improvements still viable? How must a Smart Order Router’s logic be adapted to a world where the definition of “best price” is now contingent on the prevailing spread width measured in ticks?

The knowledge of this regime is a component in a larger system of operational intelligence. The ultimate objective is the design of a superior execution framework, one that understands these foundational constraints and leverages them to achieve capital efficiency. The market is a complex adaptive system, and a change to a fundamental rule like the minimum price increment creates ripples that affect liquidity, routing decisions, and ultimately, investment performance. The strategic potential lies not in circumventing the rules, but in building a system that masters them.

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## Glossary

<a href="https://prime.greeks.live/question/how-do-systematic-internalisers-alter-european-liquidity-dynamics-compared-to-us-sdp/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Systematic Internalisers

European SIs alter liquidity via regulated quoting obligations, while US SDPs use proprietary tech for price improvement. </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">
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## 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/tick-size-regime/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A scratched blue sphere, representing market microstructure and liquidity pool for digital asset derivatives, encases a smooth teal sphere, symbolizing a private quotation via RFQ protocol. An institutional-grade structure suggests a Prime RFQ facilitating high-fidelity execution and managing counterparty risk](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-protocols-optimizing-digital-asset-derivative-execution-microstructure.jpg)

## Tick Size Regime

Meaning ▴ A Tick Size Regime specifies the minimum allowable price increment for an asset's quotation and trading, directly influencing order book granularity and the fundamental mechanics of price discovery within a defined market segment. </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">
![Precision-engineered abstract components depict institutional digital asset derivatives trading. A central sphere, symbolizing core asset price discovery, supports intersecting elements representing multi-leg spreads and aggregated inquiry](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-microstructure-optimization.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/smart-order-router/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A crystalline geometric structure, symbolizing precise price discovery and high-fidelity execution, rests upon an intricate market microstructure framework. This visual metaphor illustrates the Prime RFQ facilitating institutional digital asset derivatives trading, including Bitcoin options and Ethereum futures, through RFQ protocols for block trades with minimal slippage](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-high-fidelity-execution.jpg)

## Smart Order Router

Meaning ▴ A Smart Order Router (SOR) is an algorithmic trading mechanism designed to optimize order execution by intelligently routing trade instructions across multiple liquidity venues. </a><a href="https://prime.greeks.live/area/lit-market/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A luminous blue Bitcoin coin rests precisely within a sleek, multi-layered platform. This embodies high-fidelity execution of digital asset derivatives via an RFQ protocol, highlighting price discovery and atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-precision-3.jpg)

## Lit Market

Meaning ▴ A lit market is a trading venue providing mandatory pre-trade transparency. </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">
![Close-up reveals robust metallic components of an institutional-grade execution management system. Precision-engineered surfaces and central pivot signify high-fidelity execution for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-digital-asset-derivatives-rfq-execution-precision-optimizing-market-microstructure-for-best-execution-and-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/standard-market-size/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract geometric forms, symbolizing bilateral quotation and multi-leg spread components, precisely interact with robust institutional-grade infrastructure. This represents a Crypto Derivatives OS facilitating high-fidelity execution via an RFQ workflow, optimizing capital efficiency and price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-infrastructure.jpg)

## Standard Market Size

Meaning ▴ The Standard Market Size defines a pre-calibrated notional or unit quantity for an order, representing a typical transaction volume for a specific digital asset derivative instrument on a given venue. </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">
![Internal hard drive mechanics, with a read/write head poised over a data platter, symbolize the precise, low-latency execution and high-fidelity data access vital for institutional digital asset derivatives. This embodies a Principal OS architecture supporting robust RFQ protocols, enabling atomic settlement and optimized liquidity aggregation within complex market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-precision-execution-system-microstructure.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 sophisticated mechanical system featuring a translucent, crystalline blade-like component, embodying a Prime RFQ for Digital Asset Derivatives. This visualizes high-fidelity execution of RFQ protocols, demonstrating aggregated inquiry and price discovery within market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-system-microstructure-1.jpg)

## Market 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/tick-size/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precise geometric prism reflects on a dark, structured surface, symbolizing institutional digital asset derivatives market microstructure. This visualizes block trade execution and price discovery for multi-leg spreads via RFQ protocols, ensuring high-fidelity execution and capital efficiency within Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-precision-execution.jpg)

## Tick Size

Meaning ▴ Tick Size defines the minimum permissible price increment for a financial instrument on an exchange, establishing the smallest unit by which a security's price can change or an order can be placed. </a><a href="https://prime.greeks.live/area/esma/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision instrument probes a speckled surface, visualizing market microstructure and liquidity pool dynamics within a dark pool. This depicts RFQ protocol execution, emphasizing price discovery for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-flow.jpg)

## Esma

Meaning ▴ ESMA, the European Securities and Markets Authority, functions as an independent European Union agency responsible for safeguarding the stability of the EU's financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, alongside enhancing investor protection. </a><a href="https://prime.greeks.live/area/order-flow/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision-engineered modular components, with transparent elements and metallic conduits, depict a robust RFQ Protocol engine. This architecture facilitates high-fidelity execution for institutional digital asset derivatives, enabling efficient liquidity aggregation and atomic settlement within market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-optimizing-high-fidelity-execution-and-liquidity-aggregation.jpg)

## Order Flow

Meaning ▴ Order Flow represents the real-time sequence of executable buy and sell instructions transmitted to a trading venue, encapsulating the continuous interaction of market participants' supply and demand. </a><a href="https://prime.greeks.live/area/execution-quality/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Textured institutional-grade platform presents RFQ inquiry disk amidst liquidity fragmentation. Singular price discovery point floats](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-microstructure-prime-os-best-execution.jpg)

## Execution Quality

Meaning ▴ Execution Quality quantifies the efficacy of an order's fill, assessing how closely the achieved trade price aligns with the prevailing market price at submission, alongside consideration for speed, cost, and market impact. </a><a href="https://prime.greeks.live/question/what-are-the-key-architectural-differences-between-a-compliant-and-a-non-compliant-rfq-platform/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated internal mechanism of a split sphere reveals the core of an institutional-grade RFQ protocol. Polished surfaces reflect intricate components, symbolizing high-fidelity execution and price discovery within digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-system.jpg)

## Compliant Price Improvement

A compliant RFQ platform is an immutable system of record; a non-compliant one is a discretionary communication channel. </a><a href="https://prime.greeks.live/area/lit-venues/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![The image displays a sleek, intersecting mechanism atop a foundational blue sphere. It represents the intricate market microstructure of institutional digital asset derivatives trading, facilitating RFQ protocols for block trades](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-execution.jpg)

## Lit Venues

Meaning ▴ Lit Venues represent regulated trading platforms where pre-trade transparency is a fundamental characteristic, displaying real-time bid and offer prices, along with associated sizes, to all market participants. </a><a href="https://prime.greeks.live/question/what-are-the-security-implications-of-a-public-facing-rest-api-versus-a-point-to-point-fix-connection/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intersecting teal and dark blue planes, with reflective metallic lines, depict structured pathways for institutional digital asset derivatives trading. This symbolizes high-fidelity execution, RFQ protocol orchestration, and multi-venue liquidity aggregation within a Prime RFQ, reflecting precise market microstructure and optimal price discovery](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-digital-asset-rfq-execution-liquidity-microstructure.jpg)

## Mid-Point Execution

A REST API secures the transaction; a FIX connection secures the relationship. </a><a href="https://prime.greeks.live/area/rts-1/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision-engineered beige and teal conduits intersect against a dark void, symbolizing a Prime RFQ protocol interface. Transparent structural elements suggest multi-leg spread connectivity and high-fidelity execution pathways for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/insti-grade-digital-asset-derivatives-rfq-protocols-multi-leg-execution-junction.jpg)

## Rts 1

Meaning ▴ RTS 1, or Real-time Transaction Stream One, designates a primary, high-throughput, low-latency data channel engineered for the instantaneous transmission and processing of critical market data and order execution instructions within a proprietary trading infrastructure. </a>

**Tags:** [Off-Venue Trading](https://options.greeks.live/area/off-venue-trading/), [Best Execution](https://options.greeks.live/area/best-execution/), [Lit Venues](https://options.greeks.live/area/lit-venues/), [Lit Market](https://options.greeks.live/area/lit-market/), [Smart Order Router](https://options.greeks.live/area/smart-order-router/), [RTS 1](https://options.greeks.live/area/rts-1/)	

## Discover More

- 
### [How Have Smart Order Routers Evolved to Incorporate Systematic Internaliser Liquidity Sources Effectively?](https://options.greeks.live/question/how-have-smart-order-routers-evolved-to-incorporate-systematic-internaliser-liquidity-sources-effectively/)
![Smooth, glossy, multi-colored discs stack irregularly, topped by a dome. This embodies institutional digital asset derivatives market microstructure, with RFQ protocols facilitating aggregated inquiry for multi-leg spread execution. It signifies high-fidelity execution, price discovery across diverse liquidity pools, driven by Prime RFQ for best execution.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-for-prime-os-best-execution.jpg)

Smart Order Routers evolved by developing data-driven, probabilistic models to integrate private SI liquidity for superior execution.

- 
### [What Is the Strategic Rationale for Excluding Negotiated Trades from the New Cap?](https://options.greeks.live/question/what-is-the-strategic-rationale-for-excluding-negotiated-trades-from-the-new-cap/)
![Precision metallic mechanism with a central translucent sphere, embodying institutional RFQ protocols for digital asset derivatives. This core represents high-fidelity execution within a Prime RFQ, optimizing price discovery and liquidity aggregation for block trades, ensuring capital efficiency and atomic settlement.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-prime-os-execution-hub.jpg)

The exclusion of large negotiated trades from volume caps is a calculated design choice to protect institutional execution quality from the market impact of transparency mandates.

- 
### [How Does the Rise of Systematic Internalisers Impact a Firm’s Best Execution Strategy?](https://options.greeks.live/question/how-does-the-rise-of-systematic-internalisers-impact-a-firms-best-execution-strategy/)
![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)

Systematic Internalisers reshape best execution by offering a bilateral, off-exchange liquidity source that necessitates a more sophisticated, data-driven approach to order routing and transaction cost analysis.

- 
### [What Are the Primary Differences in Execution Quality between Bank SIs and ELP SIs?](https://options.greeks.live/question/what-are-the-primary-differences-in-execution-quality-between-bank-sis-and-elp-sis/)
![A polished metallic disc represents an institutional liquidity pool for digital asset derivatives. A central spike enables high-fidelity execution via algorithmic trading of multi-leg spreads. The robust frame denotes a secure Prime RFQ execution management system. An antenna suggests real-time pricing and RFQ protocol integration for price discovery.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-liquidity-system.jpg)

Bank SIs offer deep, franchise-driven liquidity for size, while ELP SIs provide aggressive, automated pricing for standardized flow.

- 
### [How Does the Si Regime Impact Price Discovery and Market Quality for Non-Equity Instruments?](https://options.greeks.live/question/how-does-the-si-regime-impact-price-discovery-and-market-quality-for-non-equity-instruments/)
![Polished metallic surface with a central intricate mechanism, representing a high-fidelity market microstructure engine. Two sleek probes symbolize bilateral RFQ protocols for precise price discovery and atomic settlement of institutional digital asset derivatives on a Prime RFQ, ensuring best execution for Bitcoin Options.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-institutional-digital-asset-derivatives-rfq-engine-core-market-microstructure-intelligence-layer.jpg)

The SI regime provides regulated, principal-based liquidity for non-equity instruments, impacting price discovery through a bilateral, off-venue execution model.

- 
### [What Are the Primary Differences between the UK and EU Dark Pool Regulations?](https://options.greeks.live/question/what-are-the-primary-differences-between-the-uk-and-eu-dark-pool-regulations/)
![Sharp, layered planes, one deep blue, one light, intersect a luminous sphere and a vast, curved teal surface. This abstractly represents high-fidelity algorithmic trading and multi-leg spread execution. The sphere symbolizes a prime brokerage liquidity pool, interacting with latent liquidity for optimal RFQ protocol price discovery within complex market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-system-microstructure.jpg)

The UK's removal of volume caps versus the EU's refinement into a single, stricter cap defines the core regulatory divergence for dark pools.

- 
### [How Does the Definition of a Systematic Internaliser Affect a Firm’s Trading Strategy in Europe?](https://options.greeks.live/question/how-does-the-definition-of-a-systematic-internaliser-affect-a-firms-trading-strategy-in-europe/)
![Intersecting structural elements form an 'X' around a central pivot, symbolizing dynamic RFQ protocols and multi-leg spread strategies. Luminous quadrants represent price discovery and latent liquidity within an institutional-grade Prime RFQ, enabling high-fidelity execution for digital asset derivatives.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-enabling-high-fidelity-execution-across-disparate-liquidity-pools.jpg)

The Systematic Internaliser definition forces a firm to re-architect its trading strategy around a regulated, principal-based execution venue.

- 
### [What Are the Primary Regulatory Frameworks Governing Algorithmic Trading and Best Execution?](https://options.greeks.live/question/what-are-the-primary-regulatory-frameworks-governing-algorithmic-trading-and-best-execution/)
![Abstract intersecting geometric forms, deep blue and light beige, represent advanced RFQ protocols for institutional digital asset derivatives. These forms signify multi-leg execution strategies, principal liquidity aggregation, and high-fidelity algorithmic pricing against a textured global market sphere, reflecting robust market microstructure and intelligence layer.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-multi-leg-execution-algorithmic-pricing-global-liquidity-principal-trading-systemic-integration-high-fidelity-execution.jpg)

The primary regulatory frameworks for algorithmic trading and best execution are systemic mandates for order and transparency in financial markets.

- 
### [How Does the SI Regime Affect Price Discovery in Financial Markets?](https://options.greeks.live/question/how-does-the-si-regime-affect-price-discovery-in-financial-markets/)
![A luminous teal sphere, representing a digital asset derivative private quotation, rests on an RFQ protocol channel. A metallic element signifies the algorithmic trading engine and robust portfolio margin. A dark execution interface meets a Prime RFQ foundation, optimizing market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-microstructure-optimizing-prime-os.jpg)

The Systematic Internaliser regime re-architects price discovery by diverting order flow from lit markets to a regulated, principal-based bilateral trading channel.

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---

**Original URL:** https://options.greeks.live/question/how-does-the-mifid-ii-tick-size-regime-specifically-alter-si-quoting-and-price-improvement/
