# How Does the SI Regime Affect Best Execution Proof for Illiquid Assets? ▴ Question

**Published:** 2025-08-05
**Categories:** Question

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## Concept

The [Systematic Internaliser](https://prime.greeks.live/area/systematic-internaliser/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (SI) regime, a core component of the MiFID II architecture, introduces a structural paradox when applied to [illiquid assets](https://prime.greeks.live/area/illiquid-assets/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). Its primary function is to bring transparency and order to significant bilateral trading by formalizing principal-desk activities into a defined regulatory category. For an investment firm executing client orders on its own account, achieving SI status is a function of crossing quantitative thresholds for frequency and volume in a specific instrument class.

This framework fundamentally alters the nature of demonstrating [best execution](https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The process shifts from one of discovery within a transparent, multilateral order book to one of constructing a defensible justification for a price arrived at bilaterally.

This challenge is magnified exponentially in the context of illiquid assets, such as bespoke over-the-counter (OTC) derivatives or thinly traded corporate bonds. These instruments lack the continuous, reliable public price feeds that are the bedrock of best execution validation for liquid equities or futures. The very nature of an SI is to internalize flow.

When that flow is in an asset with no contemporaneous public print, the SI’s quoted price becomes a dominant, yet isolated, data point. The core operational question becomes how to prove that this internally generated price is fair and represents the best possible outcome for the client, when external reference points are scarce or non-existent.

> The SI regime recasts best execution for illiquids from a process of price discovery to a process of price justification.

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## How Does an SI Reconcile Principal Trading with Fiduciary Duty?

The reconciliation of a firm’s commercial interest as a principal with its fiduciary duty to the client is the central challenge. The [best execution obligation](https://prime.greeks.live/area/best-execution-obligation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) under [MiFID II](https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is absolute and applies to all financial instruments, irrespective of their liquidity profile or the venue of execution. It requires firms to take all sufficient steps to obtain the best possible result, considering a matrix of factors including price, costs, speed, and likelihood of execution. For an SI, this means its internal processes must be robust enough to withstand regulatory scrutiny and prove that the price offered to a client was not merely convenient for the firm’s own book, but was genuinely the best outcome available under the prevailing market conditions.

This is achieved by building an internal system of checks and balances. The firm must create a verifiable data trail that substantiates the fairness of its price. This involves gathering market data for comparable or correlated products, soliciting quotes from other [liquidity providers](https://prime.greeks.live/area/liquidity-providers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), and using internal valuation models. The objective is to construct a “virtual” competitive environment around the [illiquid trade](https://prime.greeks.live/question/how-is-best-execution-measured-and-proven-in-an-rfq-trade-for-illiquid-securities/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), demonstrating that the final execution price is benchmarked against a credible and objective set of data points, even if a single, definitive market price is absent.

![Dark, reflective planes intersect, outlined by a luminous bar with three apertures. This visualizes RFQ protocols for institutional liquidity aggregation and high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-dynamics.jpg)

## The Architectural Shift in Proving Compliance

The SI framework forces a firm to move from being a passive consumer of market-wide execution data to an active producer and curator of its own justification data. For liquid instruments, proof of best execution can often be established by referencing the consolidated tape or the state of the order book on a public venue at the time of the trade. For an illiquid instrument traded with an SI, this external proof is unavailable. The burden of proof shifts inward.

Consequently, the firm’s compliance architecture must be redesigned. It requires systems capable of capturing not just the executed trade details, but the entire context of the execution decision. This includes records of all quotes requested and received, the inputs and outputs of internal pricing models, the rationale for selecting a specific execution strategy, and timestamps for every step of the process. The focus is on creating an auditable, evidence-based narrative that demonstrates a systematic and consistent approach to achieving the best client outcome, transforming a compliance obligation into a driver for more sophisticated internal data infrastructure.

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![A precise central mechanism, representing an institutional RFQ engine, is bisected by a luminous teal liquidity pipeline. This visualizes high-fidelity execution for digital asset derivatives, enabling precise price discovery and atomic settlement within an optimized market microstructure for multi-leg spreads](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-core-execution-system-1.jpg)

## Strategy

The strategic response to the SI regime’s impact on illiquid assets is the development and implementation of a “Best Execution [Conclusive Framework](https://prime.greeks.live/area/conclusive-framework/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).” This is a holistic system of policies, data architecture, and operational procedures designed to create a defensible and auditable record for every transaction. Its purpose is to systematically address the inherent information asymmetry in bilateral illiquid markets and provide a robust answer to the question of [price fairness](https://prime.greeks.live/area/price-fairness/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) before it is ever asked by a regulator or client.

This framework is built on the principle of verifiable comparison. Since a public, contemporaneous price is unavailable for an [illiquid asset](https://prime.greeks.live/area/illiquid-asset/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), the SI must create a synthetic benchmark through a structured process. This involves checking the fairness of the price proposed to the client by gathering market data used in the estimation of the price and, where possible, comparing it with similar or comparable products. The strategy is to treat every illiquid execution not as a single event, but as the conclusion of a documented, multi-faceted validation process.

> A Conclusive Framework transforms the best execution obligation from a post-trade reporting task into a pre-trade risk management discipline.

![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)

## What Data Constitutes a Fair Market Price?

In the absence of a liquid market, the definition of a “fair price” becomes a composite of several data sources. A core strategy for an SI is to define, in its formal [execution policy](https://prime.greeks.live/area/execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), what constitutes this composite price. This policy becomes the cornerstone of its Conclusive Framework. The data inputs are methodically gathered and weighted to form a defensible price range.

- **Comparable Instrument Benchmarking** ▴ This involves identifying a “proxy” instrument that is more liquid but shares key characteristics with the illiquid asset. For a specific corporate bond, this could be a more frequently traded bond from the same issuer or sector with a similar duration. The strategy requires a documented methodology for calculating the spread or price differential between the illiquid asset and its liquid proxy.

- **Multi-Counterparty Quote Solicitation** ▴ The [Request for Quote](https://prime.greeks.live/area/request-for-quote/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (RFQ) process is central. Even when executing as principal, the SI must demonstrate it has surveyed the available market. By sending RFQs to a pre-defined and objectively selected group of other liquidity providers, the SI creates a competitive tension and generates a set of contemporaneous, executable prices. Capturing all responses, including declines, is a critical part of the data trail.

- **Internal Model Validation** ▴ SIs must use internal pricing models to generate their own independent valuation. The strategy here is one of transparency and consistency. The models, their inputs (e.g. yield curves, volatility surfaces), and their assumptions must be documented, validated by an independent function within the firm, and applied consistently across similar transactions.

The table below compares the strategic attributes of executing an illiquid asset through different channels, highlighting the unique position of the SI.

| Execution Channel | Price Discovery Mechanism | Transparency (Pre-Trade) | Counterparty | Best Execution Data Trail |
| --- | --- | --- | --- | --- |
| Systematic Internaliser (SI) | Bilateral negotiation benchmarked against internal models and external quotes. | Quote provided to client on request; no public dissemination required for illiquids. | The SI firm itself (Principal). | Internally constructed; relies on RFQ records, model outputs, and comparable data. |
| Organised Trading Facility (OTF) | Discretionary; can include RFQ, voice, or hybrid systems. | Indicative quotes may be available to facility participants. | Multiple third-party liquidity providers. | Generated by the OTF operator; captures interactions within the system. |
| Pure OTC (Bilateral) | Direct negotiation between two parties. | None. | Any single counterparty. | Relies on self-reporting by both parties; often lacks structured, comparative data. |

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## The Architecture of a Defensible Policy

The strategic foundation of the Conclusive Framework is the firm’s best execution policy. This document is not a high-level statement of intent; it is a detailed operational manual that prescribes the firm’s approach. It must be specific, granular, and leave no room for ambiguity in its application to illiquid instruments.

A successful policy architecture includes several key components:

- **Instrument Classification System** ▴ A clear methodology for categorizing instruments by liquidity. This determines which execution protocols apply and must be based on objective criteria like trading frequency and volume.

- **Venue and Counterparty Selection Criteria** ▴ The policy must define the “sufficient steps” taken to ensure best execution. This includes the process for selecting the pool of counterparties for an RFQ, ensuring the selection is objective and designed to access meaningful liquidity.

- **Price Fairness Validation Procedure** ▴ This section explicitly details the waterfall of validation steps ▴ first, check for comparable instrument data; second, initiate an RFQ; third, benchmark against internal models. It defines the acceptable deviation between the execution price and the constructed benchmark.

- **Record-Keeping Mandates** ▴ The policy mandates the specific data points that must be captured for every illiquid trade, ensuring that the evidence required for the Conclusive Framework is always available for review.

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## Execution

The execution of the best execution obligation for an illiquid asset within a Systematic Internaliser is a matter of procedural discipline and meticulous data architecture. It translates the strategic Conclusive Framework into a series of non-negotiable operational steps. The objective is to produce a self-contained, auditable “[Best Execution File](https://prime.greeks.live/area/best-execution-file/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” for every single transaction, which serves as the definitive proof of compliance. This file is not an afterthought; its construction is integrated into the trading workflow itself.

This operationalization moves beyond policy into the realm of system design and trader conduct. The execution workflow must be engineered to enforce data capture at every stage, ensuring that the rationale behind every decision is recorded contemporaneously. For illiquid assets, where judgment plays a significant role, documenting the “why” is as important as recording the “what.”

> The Best Execution File is the ultimate output of the SI’s operational workflow, demonstrating a systematic process rather than a favorable outcome.

![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)

## Can a Model Price Ever Justify an Execution?

An internal [model price](https://prime.greeks.live/question/what-is-the-difference-between-a-generative-model-of-the-order-book-and-a-predictive-price-model/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), on its own, is insufficient to justify an execution. Its role is as a critical point of validation within a broader set of data. The execution workflow must treat the model price as a benchmark, not as the sole determinant of fairness. The process ensures the model itself is subject to oversight and its output is contextualized with real-world, executable quotes where possible.

The operational playbook for a trader executing an illiquid trade must therefore follow a clear, sequential logic. This process ensures that the final price is tested against multiple reference points, creating a robust defense against any challenge of unfair pricing. The steps are designed to be systematic and repeatable, forming the core of the firm’s execution protocol.

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## The Operational Playbook for an Illiquid RFQ Trade

The following steps outline the practical, sequential workflow for executing an illiquid trade and constructing the corresponding Best [Execution File](https://prime.greeks.live/area/execution-file/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This process ensures compliance by creating a comprehensive and contemporaneous record of the actions taken to secure the best possible result for the client.

- **Step 1 Pre-Trade Analysis and Classification** ▴ The process begins with the formal classification of the instrument as “illiquid” according to the firm’s documented policy. The trader must record the evidence used for this classification (e.g. absence of recent trades, wide indicative spreads from data vendors). This initial step justifies the application of the specific illiquid execution protocol.

- **Step 2 Counter-Pricing Data Sourcing** ▴ The trader initiates a Request for Quote (RFQ) to a pre-approved pool of external liquidity providers. The system must log the identity of each provider, the exact time the request is sent, and the full content of every response received, including price, size, and any rejections or “no-bids.” This creates the primary evidence of market sounding.

- **Step 3 Internal Price Validation and Benchmarking** ▴ Simultaneously, the trader generates a price from the firm’s internal valuation model. This model price, along with its key inputs, is logged. The trader then benchmarks the external quotes against this internal price and any available data on comparable instruments. Any significant deviation must be flagged and investigated.

- **Step 4 The Execution Decision and Rationale** ▴ The trader selects the final execution price and counterparty (which may be the SI’s own desk). The critical action at this stage is the documentation of the rationale. If the best price was not chosen, a clear reason must be provided (e.g. superior settlement certainty, lower counterparty risk). This narrative is a core component of the Best Execution File.

- **Step 5 Post-Trade Data Collation and Reporting** ▴ Immediately following execution, all the captured data ▴ classification evidence, RFQ logs, model outputs, execution timestamps, and trader rationale ▴ is automatically collated into the final Best Execution File. This file is then used to populate the necessary fields for any required regulatory reports, such as those derived from the principles of [RTS 27](https://prime.greeks.live/area/rts-27/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

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## Quantitative Modeling and Data Analysis

The data captured during the execution process must be structured and granular. The following table provides a sample of what a Best Execution File might contain for a single illiquid corporate bond trade. It demonstrates the level of detail required to build a defensible record.

| Timestamp (UTC) | Action | Data Point / Detail | Source System | Trader Rationale / Notes |
| --- | --- | --- | --- | --- |
| 14:02:03 | Instrument Classification | ‘XYZ Corp 8% 2045’ classified as illiquid. Zero trades in last 30 days. | Liquidity Analytics Module | Proceeding under Illiquid Asset Protocol. |
| 14:02:15 | RFQ Sent | Request for 5M sent to LP1, LP2, LP3. | RFQ System Log | Standard pool for this asset class. |
| 14:02:28 | Quote Received | LP1 Quote ▴ 98.75 | RFQ System Log | N/A |
| 14:02:31 | Quote Received | LP2 Quote ▴ 98.81 | RFQ System Log | N/A |
| 14:02:35 | Quote Declined | LP3 Response ▴ Decline to quote. | RFQ System Log | Noted. |
| 14:02:40 | Internal Model Price | Internal valuation ▴ 98.79 | Internal Pricing Engine v3.1 | Model price is within the external quote range. |
| 14:03:10 | Execution | Executed 5M at 98.81 with SI desk (matching LP2). | Order Management System | Price matches best external quote. Execution with SI desk provides settlement efficiency for client. |

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## References

- Bafin. “Systematic internalisers ▴ Main points of the new supervisory regime under MiFID II.” 2 May 2017.

- International Capital Market Association. “MiFID II implementation ▴ the Systematic Internaliser regime.” ICMA Quarterly Report, Second Quarter 2017.

- European Securities and Markets Authority. “MiFIR report on systematic internalisers in non-equity instruments.” ESMA70-156-2756, 16 July 2020.

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

- Ganado Advocates. “MiFID II ▴ Are you a systematic internaliser?” 5 February 2024.

- Autorité des Marchés Financiers. “Guide to best execution.” 30 October 2017.

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

- European Securities and Markets Authority. “Consultation Paper – RTS 27 and 28 reporting requirements.” 24 September 2021.

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## Reflection

The architecture required to navigate the SI regime for illiquid assets prompts a fundamental re-evaluation of a firm’s operational philosophy. The systems and protocols detailed are components of a larger institutional capability. They represent a shift from viewing compliance as a reactive, evidence-gathering burden to seeing it as a proactive driver of infrastructural investment and process integrity. The obligation to prove best execution becomes a catalyst for building a more intelligent, resilient, and ultimately more competitive trading framework.

Consider your own operational architecture. Is it a series of discrete processes held together by manual intervention, or is it a coherent system where data flows seamlessly from pre-trade analysis to post-trade justification? The challenge presented by illiquid assets within the SI regime is a stress test for the entire execution platform. Acing that test provides more than regulatory safety; it provides a strategic advantage rooted in superior operational control and demonstrable client value.

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## 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">
![Precision system for institutional digital asset derivatives. Translucent elements denote multi-leg spread structures and RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/07/precision-execution-infrastructure-for-institutional-digital-asset-derivatives-request-for-quote-protocol-optimization.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/illiquid-assets/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central mechanism of an Institutional Grade Crypto Derivatives OS with dynamically rotating arms. These translucent blue panels symbolize High-Fidelity Execution via an RFQ Protocol, facilitating Price Discovery and Liquidity Aggregation for Digital Asset Derivatives within complex Market Microstructure](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-engine-for-digital-asset-derivatives-best-execution.jpg)

## Illiquid Assets

Meaning ▴ An illiquid asset is an investment that cannot be readily converted into cash without a substantial loss in value or a significant delay. </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 precise digital asset derivatives trading mechanism, featuring transparent data conduits symbolizing RFQ protocol execution and multi-leg spread strategies. Intricate gears visualize market microstructure, ensuring high-fidelity execution and robust price discovery](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-institutional-digital-asset-derivatives-rfq-execution-framework.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/best-execution-obligation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An abstract composition featuring two overlapping digital asset liquidity pools, intersected by angular structures representing multi-leg RFQ protocols. This visualizes dynamic price discovery, high-fidelity execution, and aggregated liquidity within institutional-grade crypto derivatives OS, optimizing capital efficiency and mitigating counterparty risk](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-optimizing-aggregated-liquidity-and-multi-leg-execution-via-advanced-market-microstructure.jpg)

## Best Execution Obligation

Meaning ▴ The Best Execution Obligation represents a core fiduciary duty requiring financial intermediaries to take all reasonable steps to obtain the most favorable terms available for their clients' orders, considering prevailing market conditions and the specific characteristics of the order. </a><a href="https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![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)

## 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/liquidity-providers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Sleek, domed institutional-grade interface with glowing green and blue indicators highlights active RFQ protocols and price discovery. This signifies high-fidelity execution within a Prime RFQ for digital asset derivatives, ensuring real-time liquidity and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-prime-os-execution-interface.jpg)

## Liquidity Providers

Meaning ▴ Liquidity Providers are market participants, typically institutional entities or sophisticated trading firms, that facilitate efficient market operations by continuously quoting bid and offer prices for financial instruments. </a><a href="https://prime.greeks.live/question/how-is-best-execution-measured-and-proven-in-an-rfq-trade-for-illiquid-securities/?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)

## Illiquid Trade

Proving best execution for illiquid RFQs requires a defensible, data-rich audit trail of competitive quotes benchmarked against pre-trade analytics. </a><a href="https://prime.greeks.live/area/conclusive-framework/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, split capsule object reveals an internal glowing teal light connecting its two halves, symbolizing a secure, high-fidelity RFQ protocol facilitating atomic settlement for institutional digital asset derivatives. This represents the precise execution of multi-leg spread strategies within a principal's operational framework, ensuring optimal liquidity aggregation](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-system-2.jpg)

## Conclusive Framework

Meaning ▴ A Conclusive Framework defines a deterministic set of rules and computational processes that guarantee a definitive, irreversible outcome upon execution, typically in critical financial operations such as trade finality, netting, or collateral allocation within institutional digital asset derivatives. </a><a href="https://prime.greeks.live/area/price-fairness/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intersecting abstract geometric planes depict institutional grade RFQ protocols and market microstructure. Speckled surfaces reflect complex order book dynamics and implied volatility, while smooth planes represent high-fidelity execution channels and private quotation systems for digital asset derivatives within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-protocols-digital-asset-microstructure-execution.jpg)

## Price Fairness

Meaning ▴ Price Fairness refers to the state where a transaction's executed price accurately reflects the prevailing market value, considering real-time liquidity, order book depth, and the absence of undue informational asymmetry at the point of execution. </a><a href="https://prime.greeks.live/area/illiquid-asset/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Smooth, layered surfaces represent a Prime RFQ Protocol architecture for Institutional Digital Asset Derivatives. They symbolize integrated Liquidity Pool aggregation and optimized Market Microstructure](https://options.greeks.live/wp-content/uploads/2025/07/market-microstructure-rfq-protocols-for-digital-asset-derivatives.jpg)

## Illiquid Asset

Meaning ▴ An Illiquid Asset represents any holding that cannot be converted into cash rapidly without incurring a substantial discount to its intrinsic valuation. </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">
![A complex core mechanism with two structured arms illustrates a Principal Crypto Derivatives OS executing RFQ protocols. This system enables price discovery and high-fidelity execution for institutional digital asset derivatives block trades, optimizing market microstructure and capital efficiency via private quotations](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-digital-asset-derivatives-rfq-execution-protocol-system.jpg)

## 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/request-for-quote/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Sleek, off-white cylindrical module with a dark blue recessed oval interface. This represents a Principal's Prime RFQ gateway for institutional digital asset derivatives, facilitating private quotation protocol for block trade execution, ensuring high-fidelity price discovery and capital efficiency through low-latency liquidity aggregation](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-portal-optimal-institutional-digital-asset-execution.jpg)

## Request for Quote

Meaning ▴ A Request for Quote, or RFQ, constitutes a formal communication initiated by a potential buyer or seller to solicit price quotations for a specified financial instrument or block of instruments from one or more liquidity providers. </a><a href="https://prime.greeks.live/area/best-execution-file/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intersecting translucent planes and a central financial instrument depict RFQ protocol negotiation for block trade execution. Glowing rings emphasize price discovery and liquidity aggregation within market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-orchestration-for-high-fidelity-execution-across-prime-os.jpg)

## Best Execution File

Meaning ▴ The Best Execution File constitutes a comprehensive, time-stamped record of all pertinent data points related to an institutional order's execution journey, capturing pre-trade analysis, routing decisions, execution venue interactions, and post-trade outcomes, specifically designed to demonstrate adherence to a firm's best execution policy across digital asset derivatives. </a><a href="https://prime.greeks.live/question/what-is-the-difference-between-a-generative-model-of-the-order-book-and-a-predictive-price-model/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Polished, curved surfaces in teal, black, and beige delineate the intricate market microstructure of institutional digital asset derivatives. These distinct layers symbolize segregated liquidity pools, facilitating optimal RFQ protocol execution and high-fidelity execution, minimizing slippage for large block trades and enhancing capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/precision-rfq-protocol-execution-institutional-digital-asset-derivatives-flow.jpg)

## Model Price

A generative model simulates the entire order book's ecosystem, while a predictive model forecasts a specific price point within it. </a><a href="https://prime.greeks.live/area/execution-file/?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)

## Execution File

Meaning ▴ An Execution File defines a pre-configured, deterministic set of instructions or a software module governing the precise routing and execution logic for a specific trading strategy or asset class within a sophisticated digital asset trading system. </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">
![A reflective, metallic platter with a central spindle and an integrated circuit board edge against a dark backdrop. This imagery evokes the core low-latency infrastructure for institutional digital asset derivatives, illustrating high-fidelity execution and market microstructure dynamics](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-infrastructure-precision.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>

**Tags:** [RFQ System](https://options.greeks.live/area/rfq-system/), [RTS 28](https://options.greeks.live/area/rts-28/), [Trade Reporting](https://options.greeks.live/area/trade-reporting/), [RTS 27](https://options.greeks.live/area/rts-27/), [MiFID II](https://options.greeks.live/area/mifid-ii/), [Execution Policy](https://options.greeks.live/area/execution-policy/)	

## Discover More

- 
### [How Does MiFID II Change the Proof of Best Execution for Illiquid Assets?](https://options.greeks.live/question/how-does-mifid-ii-change-the-proof-of-best-execution-for-illiquid-assets/)
![An abstract, precision-engineered mechanism showcases polished chrome components connecting a blue base, cream panel, and a teal display with numerical data. This symbolizes an institutional-grade RFQ protocol for digital asset derivatives, ensuring high-fidelity execution, price discovery, multi-leg spread processing, and atomic settlement within a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-precision-execution-1.jpg)

MiFID II mandates a shift from asserting 'reasonable steps' to proving 'all sufficient steps', requiring a data-driven, auditable process for valuing and executing illiquid assets.

- 
### [How Do MiFID II Best Execution Requirements Specifically Impact RFQ Workflows?](https://options.greeks.live/question/how-do-mifid-ii-best-execution-requirements-specifically-impact-rfq-workflows/)
![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. It embodies an advanced Prime RFQ component, optimizing Liquidity Pool access and Market Microstructure via Algorithmic Trading.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-core-best-execution-prime-os.jpg)

MiFID II transforms RFQ workflows from simple price-seeking inquiries into auditable, data-driven processes proving best execution.

- 
### [What Are the Key Differences in Applying Best Execution to a Professional Client versus a Retail Client for OTC Trades?](https://options.greeks.live/question/what-are-the-key-differences-in-applying-best-execution-to-a-professional-client-versus-a-retail-client-for-otc-trades/)
![An abstract composition featuring two intersecting, elongated objects, beige and teal, against a dark backdrop with a subtle grey circular element. This visualizes RFQ Price Discovery and High-Fidelity Execution for Multi-Leg Spread Block Trades within a Prime Brokerage Crypto Derivatives OS for Institutional Digital Asset Derivatives.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-options-rfq-for-multi-leg-spreads-price-discovery.jpg)

Best execution for OTC trades shifts from a protective duty of ensuring fair cost for retail clients to enabling strategic, multi-factor performance for professionals.

- 
### [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 Does MiFID II Define the Scope of Best Execution for OTFs?](https://options.greeks.live/question/how-does-mifid-ii-define-the-scope-of-best-execution-for-otfs/)
![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)

MiFID II defines OTF best execution by embedding the operator's discretion into a regulated, auditable framework of client-centric duties.

- 
### [How Does MiFID II Define Best Execution for OTC Derivatives?](https://options.greeks.live/question/how-does-mifid-ii-define-best-execution-for-otc-derivatives/)
![A clear sphere balances atop concentric beige and dark teal rings, symbolizing atomic settlement for institutional digital asset derivatives. This visualizes high-fidelity execution via RFQ protocol precision, optimizing liquidity aggregation and price discovery within market microstructure and a Principal's operational framework.](https://options.greeks.live/wp-content/uploads/2025/08/digital-asset-derivatives-rfq-execution-platform-precision.jpg)

MiFID II defines best execution for OTC derivatives as a systematic, evidence-based process for achieving the best total consideration for a client.

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

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

- 
### [What Are the Systemic Challenges of Applying a Single Best Execution Policy across Different Asset Classes under MiFID II?](https://options.greeks.live/question/what-are-the-systemic-challenges-of-applying-a-single-best-execution-policy-across-different-asset-classes-under-mifid-ii/)
![Four sleek, rounded, modular components stack, symbolizing a multi-layered institutional digital asset derivatives trading system. Each unit represents a critical Prime RFQ layer, facilitating high-fidelity execution, aggregated inquiry, and sophisticated market microstructure for optimal price discovery via RFQ protocols.](https://options.greeks.live/wp-content/uploads/2025/07/modular-institutional-crypto-derivatives-trading-system-components.jpg)

A unified MiFID II best execution policy requires a modular system architecture to manage divergent asset class liquidity and data structures.

- 
### [How Do Regulatory Frameworks like MiFID II Address Information Leakage and Best Execution Requirements?](https://options.greeks.live/question/how-do-regulatory-frameworks-like-mifid-ii-address-information-leakage-and-best-execution-requirements/)
![A sleek, light interface, a Principal's Prime RFQ, overlays a dark, intricate market microstructure. This represents institutional-grade digital asset derivatives trading, showcasing high-fidelity execution via RFQ protocols. It signifies optimized liquidity aggregation, algorithmic trading, and capital efficiency for block trades and multi-leg spreads.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-prime-os-execution-system.jpg)

MiFID II codifies best execution and information control into a single, data-driven system for demonstrable market integrity.

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---

**Original URL:** https://options.greeks.live/question/how-does-the-si-regime-affect-best-execution-proof-for-illiquid-assets/
