# How Should an Asset Manager's Best Execution Policy Evolve to Incorporate Systematic Internalisers? ▴ Question

**Published:** 2025-08-04
**Categories:** Question

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![A Prime RFQ engine's central hub integrates diverse multi-leg spread strategies and institutional liquidity streams. Distinct blades represent Bitcoin Options and Ethereum Futures, showcasing high-fidelity execution and optimal price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-engine-optimizing-multi-leg-spread-high-fidelity-execution-with-atomic-settlement.jpg)

![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)

## Concept

The operational architecture of an asset manager’s execution policy is undergoing a forced evolution. The introduction of the [Systematic Internaliser](https://prime.greeks.live/area/systematic-internaliser/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (SI) regime under the second Markets in [Financial Instruments Directive](https://prime.greeks.live/question/how-can-firms-quantitatively-demonstrate-best-execution-for-rfq-trades-under-the-directive/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (MiFID II) represents a fundamental alteration to the market’s structure, introducing a new and powerful category of liquidity provider that operates on a principal basis. Your existing best execution policy, likely engineered for a landscape dominated by centralized lit markets and multilateral trading facilities (MTFs), is now structurally incomplete. It presumes a certain type of interaction with the market, one based on accessing a public order book.

The SI functions according to a different protocol entirely. It is a bilateral, on-account trading counterparty that executes client orders outside of traditional trading venues.

Integrating this new component is a matter of architectural redesign. The challenge lies in connecting this bilateral [liquidity source](https://prime.greeks.live/question/how-do-systematic-internalisers-provide-an-alternative-liquidity-source-under-the-dvc/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) to your existing framework without compromising the fiduciary mandate at the heart of best execution. This process requires a shift in perspective from simply selecting a venue to actively managing a portfolio of liquidity options, each with distinct characteristics regarding transparency, market impact, and [counterparty risk](https://prime.greeks.live/area/counterparty-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

The SI offers the potential for accessing substantial liquidity with minimal market footprint, a compelling proposition for executing large or sensitive orders. This benefit, however, is coupled with the complexities of bilateral engagement and the need for a robust [quantitative framework](https://prime.greeks.live/question/how-can-quantitative-models-justify-investment-in-a-unified-compliance-framework/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) to ensure that the prices received are genuinely competitive and demonstrably deliver the best possible outcome for the client.

The policy must therefore evolve into a more dynamic and intelligent system. It must codify the [due diligence](https://prime.greeks.live/area/due-diligence/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) process for selecting SI counterparties, define the precise conditions under which this liquidity source will be accessed, and establish a rigorous methodology for post-trade analysis that can compare SI [execution quality](https://prime.greeks.live/area/execution-quality/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) against all other viable alternatives. This is an engineering problem as much as a compliance one.

The solution involves building a sophisticated decision-making engine, embedded within your [execution policy](https://prime.greeks.live/area/execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), that can intelligently route order flow to the optimal destination based on a multi-faceted analysis of the prevailing [market conditions](https://prime.greeks.live/question/how-do-exchanges-define-stressed-market-conditions-for-market-makers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and the specific characteristics of the order itself. The following sections will detail the strategic considerations and the precise execution mechanics required to construct this evolved policy, transforming it from a static compliance document into a dynamic operational playbook for achieving superior execution in a fragmented liquidity landscape.

![A central RFQ aggregation engine radiates segments, symbolizing distinct liquidity pools and market makers. This depicts multi-dealer RFQ protocol orchestration for high-fidelity price discovery in digital asset derivatives, highlighting diverse counterparty risk profiles and algorithmic pricing grids](https://options.greeks.live/wp-content/uploads/2025/07/centralized-digital-asset-rfq-orchestration-for-multi-venue-liquidity-aggregation-and-high-fidelity-execution-across-diverse-counterparties.jpg)

![Robust metallic beam depicts institutional digital asset derivatives execution platform. Two spherical RFQ protocol nodes, one engaged, one dislodged, symbolize high-fidelity execution, dynamic price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-prime-os-node.jpg)

## Strategy

The strategic integration of [Systematic Internalisers](https://prime.greeks.live/area/systematic-internalisers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) into an asset manager’s best [execution framework](https://prime.greeks.live/question/how-does-mifid-iis-regulatory-framework-impact-rfq-best-execution-obligations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is a process of architectural enhancement. It requires moving beyond a simple list of venues to constructing a sophisticated, data-driven methodology for liquidity sourcing. This strategy is founded on a re-evaluation of the core principles of best execution within a hybrid market structure that now formally recognizes large-scale, principal-risking liquidity providers as a distinct class of execution venue.

![A metallic rod, symbolizing a high-fidelity execution pipeline, traverses transparent elements representing atomic settlement nodes and real-time price discovery. It rests upon distinct institutional liquidity pools, reflecting optimized RFQ protocols for crypto derivatives trading across a complex volatility surface within Prime RFQ market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-trade-execution-pipeline-optimizing-rfq-protocols-for-best-execution-and-capital-efficiency.jpg)

## Recalibrating the Execution Factors for a Hybrid Market

The introduction of SIs compels a more granular analysis of the established [best execution](https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) factors. Each factor must be viewed through a new lens that accounts for the unique properties of bilateral, principal-based liquidity. The relative importance of these factors may shift depending on the specific order, but the method of their evaluation must be consistently applied.

![A high-fidelity institutional digital asset derivatives execution platform. A central conical hub signifies precise price discovery and aggregated inquiry for RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocol-high-fidelity-digital-asset-derivatives-execution-1.jpg)

## Price and Cost Analysis in a Bilateral Context

The price offered by an SI is a firm quote, representing a commitment to deal at a specific level for a given size. This provides a high degree of certainty. The strategic challenge is to validate this price. The policy must mandate a process for comparing the SI quote against the prevailing prices on [lit markets](https://prime.greeks.live/area/lit-markets/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), such as the European Best Bid and Offer (EBBO), as well as the prices available on MTFs.

The total cost consideration extends beyond the explicit price. It incorporates the implicit cost of [market impact](https://prime.greeks.live/area/market-impact/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). A large order executed on a [lit market](https://prime.greeks.live/area/lit-market/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) can create significant price dislocation, an expense that is often larger than any commission. SIs, by internalizing the trade, can theoretically eliminate this market impact, offering a superior all-in execution cost for size-sensitive orders. The strategy must therefore define the analytical process for estimating potential market impact and weighing it against any spread differential between the SI quote and the lit market price.

> A successful strategy hinges on a quantitative framework that can accurately compare the certain, all-in price from a Systematic Internaliser against the probabilistic, impact-adjusted cost of execution on a public venue.

![A spherical Liquidity Pool is bisected by a metallic diagonal bar, symbolizing an RFQ Protocol and its Market Microstructure. Imperfections on the bar represent Slippage challenges in High-Fidelity Execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-optimization-within-principals-market-microstructure-framework.jpg)

## Speed and Likelihood of Execution

The dimensions of speed and likelihood of execution are altered when dealing with SIs. For liquid instruments, lit markets offer near-instantaneous execution for small orders. For [large orders](https://prime.greeks.live/question/what-is-the-optimal-balance-between-using-passive-dark-pool-orders-and-aggressive-lit-market-orders/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), however, the “likelihood” of executing the full size without adverse price movement decreases substantially. An SI provides a high likelihood of execution for the full quoted size.

The “speed” in this context is the time to secure the full fill. The strategy must define the trade characteristics, primarily order size relative to [average daily volume](https://prime.greeks.live/question/how-does-order-size-relative-to-average-daily-volume-influence-algorithmic-strategy-selection/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), that would prioritize the certainty of a full fill from an SI over the potential for a partial, faster fill on a lit market.

![Two precision-engineered nodes, possibly representing a Private Quotation or RFQ mechanism, connect via a transparent conduit against a striped Market Microstructure backdrop. This visualizes High-Fidelity Execution pathways for Institutional Grade Digital Asset Derivatives, enabling Atomic Settlement and Capital Efficiency within a Dark Pool environment, optimizing Price Discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-system-nodes.jpg)

## Developing a Multi Venue Evaluation Matrix

To operationalize this strategic thinking, the policy should incorporate a formal [venue evaluation matrix](https://prime.greeks.live/question/how-does-an-rfq-platform-differentiate-between-on-venue-and-off-venue-reporting-obligations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This tool provides a structured, repeatable process for assessing and comparing all available liquidity sources. It transforms the venue selection process from a subjective decision into a data-driven one, creating a clear audit trail that justifies the routing choice for every order.

The matrix serves as a foundational component of the execution policy, ensuring that all venue types are assessed against a consistent set of criteria. This systematic approach is essential for demonstrating to regulators and clients that the firm is taking “all sufficient steps” to achieve best execution.

### Table 1 ▴ Multi-Venue Liquidity Source Evaluation Matrix

| Evaluation Criterion | Regulated Market (RM) | Multilateral Trading Facility (MTF) | Systematic Internaliser (SI) | Organised Trading Facility (OTF) |
| --- | --- | --- | --- | --- |
| Liquidity Profile | Central limit order book, diverse participants, high transparency. | Often anonymous or non-displayed pools, specific liquidity types. | Principal liquidity from a single dealer, high capacity for large sizes. | Discretionary matching, often for less liquid instruments like derivatives. |
| Pre-Trade Transparency | High, with public display of bids and offers. | Variable, can range from fully lit to fully dark. | Quote-driven, firm quotes provided on request, not publicly displayed. | Variable, often quote-driven or voice-brokered. |
| Post-Trade Transparency | High, with immediate public reporting of trades. | High, with public reporting of trades. | SI has the reporting obligation, ensuring transparency. | High, with public reporting of trades. |
| Market Impact Potential | High for large orders, as they consume visible liquidity. | Lower than RMs, as execution can occur in dark pools. | Very low, as the trade is internalized by the SI. | Low, due to the discretionary nature of matching. |
| Counterparty Risk | Mitigated by a central counterparty (CCP). | Often mitigated by a CCP. | Bilateral risk with the SI firm itself; requires diligent due diligence. | Bilateral risk, though the OTF operator provides a framework. |
| Primary Use Case | Standard execution for liquid, smaller-sized orders. | Accessing dark liquidity pools to reduce market impact. | Executing large blocks or illiquid instruments with minimal footprint. | Trading non-equities like bonds and derivatives via specific protocols. |

![A central metallic bar, representing an RFQ block trade, pivots through translucent geometric planes symbolizing dynamic liquidity pools and multi-leg spread strategies. This illustrates a Principal's operational framework for high-fidelity execution and atomic settlement within a sophisticated Crypto Derivatives OS, optimizing private quotation workflows](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-facilitating-high-fidelity-price-discovery-and-optimal-capital-efficiency-within-advanced-market-microstructure.jpg)

## What Is the Optimal Liquidity Sourcing Logic?

With a clear evaluation framework, the next strategic step is to define the logic that governs how and when different liquidity sources are accessed. This is the role of a Smart Order Router (SOR) or an equivalent decision-making process within the firm’s [Execution Management System](https://prime.greeks.live/question/what-is-the-relationship-between-an-order-management-system-and-an-execution-management-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (EMS). The policy must outline the principles that guide this [routing logic](https://prime.greeks.live/question/how-can-a-firm-quantitatively-prove-its-order-routing-logic-prioritizes-best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

A tiered approach is often the most effective architecture:

- **Tier 1 Passive Lit Market Interaction** For small orders in liquid securities, the default strategy may be to place passive orders on the lit market to capture the spread. The SOR would identify the venue with the highest likelihood of a favorable fill.

- **Tier 2 Aggressive Lit And Dark Market Sweeping** For more urgent orders, the SOR would be instructed to sweep across multiple lit venues and dark pools simultaneously to source liquidity up to a certain price limit.

- **Tier 3 Targeted SI [Request For Quote](https://prime.greeks.live/area/request-for-quote/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (RFQ)** When an order exceeds a predefined size threshold (e.g. a percentage of average daily volume), the logic triggers a request for quote to a pre-approved panel of SIs. This is a discrete inquiry to source block liquidity without signaling intent to the broader market. The system would then compare the SI quotes received against the estimated cost of a Tier 2 execution.

![Precision-engineered multi-vane system with opaque, reflective, and translucent teal blades. This visualizes Institutional Grade Digital Asset Derivatives Market Microstructure, driving High-Fidelity Execution via RFQ protocols, optimizing Liquidity Pool aggregation, and Multi-Leg Spread management on a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-multi-vane-system-illustrating-institutional-digital-asset-derivatives-rfq-protocols-market-microstructure-optimized-liquidity-aggregation-prime-os-high-fidelity-execution.jpg)

## The Governance Framework for SI Interaction

A robust strategy requires a strong governance layer. The [best execution policy](https://prime.greeks.live/area/best-execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) must explicitly detail the rules of engagement with SIs. This is not just a matter of compliance; it is a critical risk management function.

- **Counterparty Selection** The policy must define the due diligence criteria for approving an SI as a counterparty. This includes assessing the SI’s financial stability, operational resilience, and the historical quality of its pricing. A formal review process should be established to periodically reassess the performance of all approved SIs.

- **Client Consent And Disclosure** The policy must be accompanied by clear disclosures to clients explaining the firm’s use of SIs. Under [MiFID II](https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), executing orders outside a trading venue requires the client’s [prior express consent](https://prime.greeks.live/guide/7-ways-to-use-options-to-express-a-market-view/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The policy must detail how this consent is obtained, recorded, and maintained.

- **Monitoring And Oversight** A dedicated function, often the [Best Execution Committee](https://prime.greeks.live/area/best-execution-committee/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), must be responsible for overseeing the firm’s interaction with SIs. This committee will review execution quality data, assess the performance of the routing logic, and make adjustments to the policy as market conditions evolve.

![The central teal core signifies a Principal's Prime RFQ, routing RFQ protocols across modular arms. Metallic levers denote precise control over multi-leg spread execution and block trades](https://options.greeks.live/wp-content/uploads/2025/07/principals-prime-os-rfq-system-institutional-digital-asset-derivatives.jpg)

![A precision institutional interface features a vertical display, control knobs, and a sharp element. This RFQ Protocol system ensures High-Fidelity Execution and optimal Price Discovery, facilitating Liquidity Aggregation](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-execution-platform-interface.jpg)

## Execution

The execution phase translates the strategic framework for Systematic Internaliser integration into a concrete set of operational procedures, technological specifications, and quantitative controls. This is the most granular level of the policy, providing the firm’s trading and compliance teams with a precise playbook for action. A failure in execution exposes the firm to regulatory risk and suboptimal client outcomes, regardless of the sophistication of the overarching strategy.

![A central dark aperture, like a precision matching engine, anchors four intersecting algorithmic pathways. Light-toned planes represent transparent liquidity pools, contrasting with dark teal sections signifying dark pool or latent liquidity](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-9.jpg)

## The Procedural Steps for Policy Amendment

Amending the best execution policy is a formal project that requires coordination across multiple functions. The process must be documented and auditable, creating a clear record of the firm’s deliberative process in adapting to the SI regime. The following steps provide a robust operational workflow.

- 
**Establish A Cross Functional [Working Group](https://prime.greeks.live/question/what-is-a-one-on-one-communication-group-for-rfq/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)** The initial step is the formation of a dedicated working group. This group should include senior representatives from the Trading Desk, Compliance, Legal, Risk Management, and Technology departments. This ensures that the policy amendments are considered from all relevant perspectives, from legal interpretation to technological feasibility.

- 
**Conduct Formal SI Counterparty Due Diligence** The working group must develop and implement a standardized due diligence questionnaire (DDQ) for all potential SI counterparties. This DDQ should cover capital adequacy, operational infrastructure, compliance with MiFID II reporting obligations ([RTS 27](https://prime.greeks.live/area/rts-27/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)), and the specific [financial instruments](https://prime.greeks.live/question/how-does-the-evolution-of-dealer-strategies-affect-the-execution-quality-for-illiquid-financial-instruments/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) for which the SI is registered. The outcome should be a formal, pre-approved list of SI counterparties.

- 
**Perform Instrument Level Suitability Analysis** The team must analyze the firm’s order flow to identify which asset classes and specific instruments are most suitable for SI execution. This analysis should be based on factors like average trade size, liquidity profiles, and historical market impact costs. The policy should then specify the types of orders that are candidates for SI routing.

- 
**Draft And Approve New Policy Language** Legal and Compliance will lead the process of drafting new clauses for the execution policy. This language must clearly articulate the firm’s approach to using SIs, the factors considered in the routing decision, and the process for comparing SI quotes to other venues. The language must be precise and unambiguous.

- 
**Update All Client Facing Documentation** This step involves revising client agreements, terms of business, and any summary execution policies. The documentation must clearly state that the firm may execute orders with SIs and must be used to obtain the required prior express consent from clients.

- 
**Configure And Test The Technology Stack** The technology team must ensure that the firm’s Order [Management System](https://prime.greeks.live/question/what-is-the-relationship-between-an-order-management-system-and-an-execution-management-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (OMS) and [Execution Management](https://prime.greeks.live/question/what-is-the-relationship-between-an-order-management-system-and-an-execution-management-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) System (EMS) are properly configured to support SI workflows. This includes establishing FIX connectivity, building the logic for the RFQ process, and ensuring that execution data from SIs is captured correctly for TCA and regulatory reporting.

- 
**Deliver Comprehensive Staff Training** All relevant staff, particularly traders and compliance officers, must be trained on the updated policy and procedures. Training should cover the rationale for using SIs, the specific workflows for the [RFQ process](https://prime.greeks.live/area/rfq-process/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), and the compliance obligations associated with this type of execution.

- 
**Implement The Enhanced Monitoring And Review Plan** The policy must specify a schedule for the ongoing monitoring of SI execution quality. The Best Execution Committee should meet quarterly to review TCA reports that specifically compare SI performance against other venues and to make any necessary adjustments to the approved counterparty list or routing logic.

![A futuristic system component with a split design and intricate central element, embodying advanced RFQ protocols. This visualizes high-fidelity execution, precise price discovery, and granular market microstructure control for institutional digital asset derivatives, optimizing liquidity provision and minimizing slippage](https://options.greeks.live/wp-content/uploads/2025/07/advanced-rfq-protocols-for-digital-asset-derivatives-price-discovery.jpg)

## How Should a Quantitative Framework for Execution Quality Analysis Evolve?

The core of the execution framework is a robust [Transaction Cost Analysis](https://prime.greeks.live/area/transaction-cost-analysis/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (TCA) system. Standard TCA metrics must be adapted to properly evaluate the performance of SI executions. The goal is to create a fair comparison between a single, large fill from an SI and the potential outcome of working the same order on lit or dark markets. This requires a more sophisticated approach to measuring implicit costs.

> A truly effective execution policy is underpinned by a TCA framework that moves beyond simple price benchmarks to model and quantify the value of reduced market impact.

The following table outlines the key TCA metrics that must be part of this evolved framework. The analysis must be capable of generating a “what-if” scenario, estimating the cost of executing the block on alternative venues to provide a meaningful benchmark for the SI fill.

### Table 2 ▴ Advanced Transaction Cost Analysis Metrics for SI Execution Evaluation

| TCA Metric | Calculation And Interpretation For SI Execution | Data Requirements |
| --- | --- | --- |
| Implementation Shortfall | Measures the total cost of execution versus the arrival price (the market price at the moment the decision to trade was made). For an SI trade, this is a clean calculation. The key is to compare this shortfall to the predicted shortfall of a lit market execution, using a market impact model. | Time-stamped decision and execution records; high-frequency market data for the arrival price; a calibrated market impact model. |
| Price Improvement vs. EBBO | Calculates the difference between the execution price from the SI and the European Best Bid or Offer (EBBO) at the time of execution. A positive value indicates direct price improvement over the public quote. | Execution price and time; consolidated European best bid/offer data feed. |
| Market Impact Avoidance | This is a modeled value. It represents the estimated cost (in basis points) that was avoided by not sending the order to the lit market. This is the primary quantitative justification for using an SI for large orders. | A pre-trade market impact model calibrated to the specific instrument and market conditions; order size and duration data. |
| Post-Trade Reversion | Measures how much the price moves back in the opposite direction after the trade is completed. Low reversion on an SI trade indicates that the trade had minimal information leakage and market impact, validating the execution method. High reversion on a lit market trade suggests high impact cost. | High-frequency market data for a period (e.g. 5-30 minutes) following the execution. |
| Spread Capture | For passive limit orders, this measures how much of the bid-ask spread was captured. For SI trades, this metric can be adapted to show where the execution price fell within the prevailing spread, providing a measure of the trade’s aggressiveness. | Execution price; contemporaneous bid and ask quotes from the primary market. |

![A sleek, conical precision instrument, with a vibrant mint-green tip and a robust grey base, represents the cutting-edge of institutional digital asset derivatives trading. Its sharp point signifies price discovery and best execution within complex market microstructure, powered by RFQ protocols for dark liquidity access and capital efficiency in atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-microstructure-price-discovery-optimization-prime-os-intelligence-layer.jpg)

## What Are the Technical Requirements for System Integration?

Effective execution requires seamless technological integration. The firm’s systems must be able to communicate with SIs efficiently and process the resulting data accurately. The policy’s execution section should specify the firm’s standards in this area.

- **FIX Protocol Connectivity** The Financial Information eXchange (FIX) protocol is the industry standard for electronic trading. The firm must ensure its EMS can support the specific FIX message types required for SI RFQ workflows. This includes messages for submitting quotes (FIX tag 35=R), receiving quotes (35=S), and executing against those quotes.

- **Execution Management System (EMS) Capabilities** The EMS is the trader’s primary interface with the market. It must be able to consolidate quotes from multiple SIs alongside the lit market [order book](https://prime.greeks.live/area/order-book/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) in a single, unified view. It should also house the smart [order routing logic](https://prime.greeks.live/area/order-routing-logic/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) that determines when to initiate the RFQ process.

- **Data Management And Reporting Architecture** The firm must have a data architecture capable of capturing and storing all relevant information for each SI trade. This includes the initial RFQ, all quotes received (even those not executed), the final execution details, and the contemporaneous [market data](https://prime.greeks.live/area/market-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) needed for TCA. This data is essential for satisfying MiFID II’s RTS 27 and [RTS 28](https://prime.greeks.live/area/rts-28/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) reporting requirements.

![A complex, intersecting arrangement of sleek, multi-colored blades illustrates institutional-grade digital asset derivatives trading. This visual metaphor represents a sophisticated Prime RFQ facilitating RFQ protocols, aggregating dark liquidity, and enabling high-fidelity execution for multi-leg spreads, optimizing capital efficiency and mitigating counterparty risk](https://options.greeks.live/wp-content/uploads/2025/07/sophisticated-multi-asset-rfq-architecture-visualizing-institutional-digital-derivatives-execution-liquidity-aggregation-and-prime-os-orchestration-for-high-fidelity-performance.jpg)

## References

- O’Hara, Maureen. _Market Microstructure Theory_. Blackwell Publishers, 1995.

- Harris, Larry. _Trading and Exchanges ▴ Market Microstructure for Practitioners_. Oxford University Press, 2003.

- Lehalle, Charles-Albert, and Sophie Laruelle, editors. _Market Microstructure in Practice_. World Scientific Publishing, 2018.

- European Securities and Markets Authority. “MiFID II and MiFIR.” ESMA, 2017.

- Financial Conduct Authority. “Markets in Financial Instruments Directive II Implementation.” FCA, 2017.

- Gomber, Peter, et al. “High-Frequency Trading.” _SSRN Electronic Journal_, 2011.

- Foucault, Thierry, et al. “Informed Trading and the Cost of Capital.” _The Journal of Finance_, vol. 72, no. 4, 2017, pp. 1447-1491.

- Madhavan, Ananth. “Market Microstructure ▴ A Survey.” _Journal of Financial Markets_, vol. 3, no. 3, 2000, pp. 205-258.

![Two sleek, distinct colored planes, teal and blue, intersect. Dark, reflective spheres at their cross-points symbolize critical price discovery nodes](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-multi-leg-execution-liquidity.jpg)

## Reflection

The integration of Systematic Internalisers into a best execution policy is a microcosm of a larger systemic shift. The market is no longer a monolithic entity but a fragmented network of interconnected liquidity nodes, each with its own protocol and purpose. The architecture you build today to accommodate SIs is a foundational layer for the market of tomorrow, which will likely feature even greater diversity in execution venues and protocols. The true measure of this evolved policy is its adaptability.

How will your framework incorporate the next innovation in liquidity provision? The quantitative rigor and procedural discipline established for SIs create a scalable template for future evolution. The ultimate goal is an execution framework that is not merely compliant, but intelligent ▴ a system that continuously learns from its own data to refine its performance and secure a durable operational advantage.

![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)

## Glossary

<a href="https://prime.greeks.live/question/how-can-firms-quantitatively-demonstrate-best-execution-for-rfq-trades-under-the-directive/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A vertically stacked assembly of diverse metallic and polymer components, resembling a modular lens system, visually represents the layered architecture of institutional digital asset derivatives. Each distinct ring signifies a critical market microstructure element, from RFQ protocol layers to aggregated liquidity pools, ensuring high-fidelity execution and capital efficiency within a Prime RFQ framework](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-execution-stack.jpg)

## Financial Instruments Directive

A firm quantitatively demonstrates RFQ best execution by architecting a data-driven system that proves its process is optimal. </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">
![Sharp, intersecting metallic silver, teal, blue, and beige planes converge, illustrating complex liquidity pools and order book dynamics in institutional trading. This form embodies high-fidelity execution and atomic settlement for digital asset derivatives via RFQ protocols, optimized by a Principal's operational framework](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-digital-asset-derivatives-market-microstructure-high-fidelity-execution-across-multi-leg-spread-rfq-protocol-orchestration-within-principals-operational-framework.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/counterparty-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, reflective bi-component structure, embodying an RFQ protocol for multi-leg spread strategies, rests on a Prime RFQ base. Surrounding nodes signify price discovery points, enabling high-fidelity execution of digital asset derivatives with capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/precision-orchestration-of-institutional-digital-asset-derivatives-rfq-protocols-for-optimal-market-microstructure.jpg)

## Counterparty Risk

Meaning ▴ Counterparty risk denotes the potential for financial loss stemming from a counterparty's failure to fulfill its contractual obligations in a transaction. </a><a href="https://prime.greeks.live/question/how-do-systematic-internalisers-provide-an-alternative-liquidity-source-under-the-dvc/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract visualization of institutional RFQ protocol for digital asset derivatives. Translucent layers symbolize dark liquidity pools within complex market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-6.jpg)

## Liquidity Source

Systematic Internalisers provide a bilateral, principal-based liquidity channel exempt from the volume caps applied to multilateral dark venues. </a><a href="https://prime.greeks.live/question/how-can-quantitative-models-justify-investment-in-a-unified-compliance-framework/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A futuristic circular lens or sensor, centrally focused, mounted on a robust, multi-layered metallic base. This visual metaphor represents a precise RFQ protocol interface for institutional digital asset derivatives, symbolizing the focal point of price discovery, facilitating high-fidelity execution and managing liquidity pool access for Bitcoin options](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-protocol-for-digital-asset-derivatives-execution.jpg)

## Quantitative Framework

A Unified Compliance Framework is justified by quantitative models that translate architectural integrity into financial ROI and strategic agility. </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">
![Two distinct components, beige and green, are securely joined by a polished blue metallic element. This embodies a high-fidelity RFQ protocol for institutional digital asset derivatives, ensuring atomic settlement and optimal liquidity](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-protocol-for-digital-asset-derivatives-high-fidelity-link.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/area/due-diligence/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision-engineered, multi-layered mechanism symbolizing a robust RFQ protocol engine for institutional digital asset derivatives. Its components represent aggregated liquidity, atomic settlement, and high-fidelity execution within a sophisticated market microstructure, enabling efficient price discovery and optimal capital efficiency for block trades](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-engine.jpg)

## Due Diligence

Meaning ▴ Due diligence refers to the systematic investigation and verification of facts pertaining to a target entity, asset, or counterparty before a financial commitment or strategic decision is executed. </a><a href="https://prime.greeks.live/question/how-do-exchanges-define-stressed-market-conditions-for-market-makers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Glowing circular forms symbolize institutional liquidity pools and aggregated inquiry nodes for digital asset derivatives. Blue pathways depict RFQ protocol execution and smart order routing](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-prime-os-execution-microstructure.jpg)

## Market Conditions

Exchanges define stressed market conditions as a codified, trigger-based state that relaxes liquidity obligations to ensure market continuity. </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 precision-engineered interface for institutional digital asset derivatives. A circular system component, perhaps an Execution Management System EMS module, connects via a multi-faceted Request for Quote RFQ protocol bridge to a distinct teal capsule, symbolizing a bespoke block trade](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-interface-for-institutional-digital-asset-derivatives-request-for-quote-protocol-high-fidelity-execution-within-principal-operating-system.jpg)

## 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/systematic-internalisers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A dark, precision-engineered module with raised circular elements integrates with a smooth beige housing. It signifies high-fidelity execution for institutional RFQ protocols, ensuring robust price discovery and capital efficiency in digital asset derivatives market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-system-core-high-speed-price-discovery-module.jpg)

## Systematic Internalisers

Meaning ▴ A market participant, typically a broker-dealer, systematically executing client orders against its own inventory or other client orders off-exchange, acting as principal. </a><a href="https://prime.greeks.live/question/how-does-mifid-iis-regulatory-framework-impact-rfq-best-execution-obligations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract dark reflective planes and white structural forms are illuminated by glowing blue conduits and circular elements. This visualizes an institutional digital asset derivatives RFQ protocol, enabling atomic settlement, optimal price discovery, and capital efficiency via advanced market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-optimized-for-high-fidelity-execution-1.jpg)

## Execution Framework

MiFID II mandates a shift from qualitative RFQ execution to a data-driven, auditable protocol for demonstrating superior client outcomes. </a><a href="https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision metallic dial on a multi-layered interface embodies an institutional RFQ engine. The translucent panel suggests an intelligence layer for real-time price discovery and high-fidelity execution of digital asset derivatives, optimizing capital efficiency for block trades within complex market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-high-fidelity-execution-system.jpg)

## Best Execution

Meaning ▴ Best Execution is the obligation to obtain the most favorable terms reasonably available for a client's order. </a><a href="https://prime.greeks.live/area/lit-markets/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A translucent blue sphere is precisely centered within beige, dark, and teal channels. This depicts RFQ protocol for digital asset derivatives, enabling high-fidelity execution of a block trade within a controlled market microstructure, ensuring atomic settlement and price discovery on a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/precision-execution-pathway-for-institutional-digital-asset-derivatives-leveraging-rfq-protocols-and-high-fidelity-market-microstructure.jpg)

## Lit Markets

Meaning ▴ Lit Markets are centralized exchanges or trading venues characterized by pre-trade transparency, where bids and offers are publicly displayed in an order book prior to execution. </a><a href="https://prime.greeks.live/area/market-impact/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![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](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-best-execution.jpg)

## Market Impact

Meaning ▴ Market Impact refers to the observed change in an asset's price resulting from the execution of a trading order, primarily influenced by the order's size relative to available liquidity and prevailing market conditions. </a><a href="https://prime.greeks.live/area/lit-market/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intersecting metallic structures symbolize RFQ protocol pathways for institutional digital asset derivatives. They represent high-fidelity execution of multi-leg spreads across diverse liquidity pools](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-framework-optimizing-multi-leg-spreads-and-liquidity-aggregation-for-best-execution.jpg)

## Lit Market

Meaning ▴ A lit market is a trading venue providing mandatory pre-trade transparency. </a><a href="https://prime.greeks.live/question/what-is-the-optimal-balance-between-using-passive-dark-pool-orders-and-aggressive-lit-market-orders/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A complex interplay of translucent teal and beige planes, signifying multi-asset RFQ protocol pathways and structured digital asset derivatives. Two spherical nodes represent atomic settlement points or critical price discovery mechanisms within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-for-optimal-liquidity-aggregation-and-high-fidelity-execution.jpg)

## Large Orders

The optimal balance is a dynamic process of algorithmic calibration, not a static ratio of venue allocation. </a><a href="https://prime.greeks.live/question/how-does-order-size-relative-to-average-daily-volume-influence-algorithmic-strategy-selection/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central hub with a teal ring represents a Principal's Operational Framework. Interconnected spherical execution nodes symbolize precise Algorithmic Execution and Liquidity Aggregation via RFQ Protocol](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-microstructure-prime-os-price-liquidity-alpha.jpg)

## Average Daily Volume

Order size relative to ADV dictates the trade-off between market impact and timing risk, governing the required algorithmic sophistication. </a><a href="https://prime.greeks.live/question/how-does-an-rfq-platform-differentiate-between-on-venue-and-off-venue-reporting-obligations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Stacked, multi-colored discs symbolize an institutional RFQ Protocol's layered architecture for Digital Asset Derivatives. This embodies a Prime RFQ enabling high-fidelity execution across diverse liquidity pools, optimizing multi-leg spread trading and capital efficiency within complex market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-stack-for-high-fidelity-execution.jpg)

## Venue Evaluation Matrix

An RFQ platform differentiates reporting by codifying MiFIR's hierarchy, assigning on-venue reports to the venue and off-venue reports to the correct counterparty based on SI status. </a><a href="https://prime.greeks.live/question/what-is-the-relationship-between-an-order-management-system-and-an-execution-management-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A light sphere, representing a Principal's digital asset, is integrated into an angular blue RFQ protocol framework. Sharp fins symbolize high-fidelity execution and price discovery](https://options.greeks.live/wp-content/uploads/2025/07/principals-core-asset-rfq-protocol-framework-for-digital-derivatives.jpg)

## Execution Management System

The OMS codifies investment strategy into compliant, executable orders; the EMS translates those orders into optimized market interaction. </a><a href="https://prime.greeks.live/question/how-can-a-firm-quantitatively-prove-its-order-routing-logic-prioritizes-best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated proprietary system module featuring precision-engineered components, symbolizing an institutional-grade Prime RFQ for digital asset derivatives. Its intricate design represents market microstructure analysis, RFQ protocol integration, and high-fidelity execution capabilities, optimizing liquidity aggregation and price discovery for block trades within a multi-leg spread environment](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-proprietary-architecture-driving-high-fidelity-digital-asset-derivatives-execution-via-rfq-protocols-and-optimized-market-microstructure-dynamics.jpg)

## Routing Logic

A firm proves its order routing logic prioritizes best execution by building a quantitative, evidence-based audit trail using TCA. </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">
![Abstract layers and metallic components depict institutional digital asset derivatives market microstructure. They symbolize multi-leg spread construction, robust FIX Protocol for high-fidelity execution, and private quotation](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-digital-asset-derivatives-rfq-protocol-high-fidelity-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-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract forms representing a Principal-to-Principal negotiation within an RFQ protocol. The precision of high-fidelity execution is evident in the seamless interaction of components, symbolizing liquidity aggregation and market microstructure optimization for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-execution-engine.jpg)

## Best Execution Policy

Meaning ▴ The Best Execution Policy defines the obligation for a broker-dealer or trading firm to execute client orders on terms most favorable to the client. </a><a href="https://prime.greeks.live/guide/7-ways-to-use-options-to-express-a-market-view/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A transparent blue sphere, symbolizing precise Price Discovery and Implied Volatility, is central to a layered Principal's Operational Framework. This structure facilitates High-Fidelity Execution and RFQ Protocol processing across diverse Aggregated Liquidity Pools, revealing the intricate Market Microstructure of Institutional Digital Asset Derivatives](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-execution-system-microstructure-principal-framework.jpg)

## Prior Express Consent

Deploy professional-grade options strategies to translate your unique market conviction into a tangible strategic edge. </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 precision internal mechanism for 'Institutional Digital Asset Derivatives' 'Prime RFQ'. White casing holds dark blue 'algorithmic trading' logic and a teal 'multi-leg spread' module](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-engine-high-fidelity-execution-liquidity-aggregation.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-committee/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Geometric shapes symbolize an institutional digital asset derivatives trading ecosystem. A pyramid denotes foundational quantitative analysis and the Principal's operational framework](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-execution-system-microstructure.jpg)

## Best Execution Committee

Meaning ▴ The Best Execution Committee functions as a formal governance body within an institutional trading framework, specifically mandated to define, implement, and continuously monitor policies and procedures ensuring optimal trade execution across all asset classes, including institutional digital asset derivatives. </a><a href="https://prime.greeks.live/question/what-is-a-one-on-one-communication-group-for-rfq/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A transparent sphere, representing a digital asset option, rests on an aqua geometric RFQ execution venue. This proprietary liquidity pool integrates with an opaque institutional grade infrastructure, depicting high-fidelity execution and atomic settlement within a Principal's operational framework for Crypto Derivatives OS](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-system-prime-os.jpg)

## Working Group

A one-on-one RFQ is a secure, bilateral communication protocol for executing sensitive trades with minimal market impact. </a><a href="https://prime.greeks.live/question/how-does-the-evolution-of-dealer-strategies-affect-the-execution-quality-for-illiquid-financial-instruments/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek metallic teal execution engine, representing a Crypto Derivatives OS, interfaces with a luminous pre-trade analytics display. This abstract view depicts institutional RFQ protocols enabling high-fidelity execution for multi-leg spreads, optimizing market microstructure and atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/advanced-institutional-digital-asset-derivatives-rfq-protocol-engine-for-high-fidelity-execution-and-market-microstructure-analysis.jpg)

## Financial Instruments

Evolved dealer strategies leverage algorithmic intermediation to transform illiquid asset execution from a capital-intensive risk transfer into a technology-driven service. </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">
![Translucent rods, beige, teal, and blue, intersect on a dark surface, symbolizing multi-leg spread execution for digital asset derivatives. Nodes represent atomic settlement points within a Principal's operational framework, visualizing RFQ protocol aggregation, cross-asset liquidity streams, and optimized market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-protocol-aggregation-and-high-fidelity-execution.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/question/what-is-the-relationship-between-an-order-management-system-and-an-execution-management-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intersecting translucent planes with central metallic nodes symbolize a robust Institutional RFQ framework for Digital Asset Derivatives. This architecture facilitates multi-leg spread execution, optimizing price discovery and capital efficiency within market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-framework.jpg)

## Execution Management

The OMS codifies investment strategy into compliant, executable orders; the EMS translates those orders into optimized market interaction. </a><a href="https://prime.greeks.live/question/what-is-the-relationship-between-an-order-management-system-and-an-execution-management-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Translucent teal glass pyramid and flat pane, geometrically aligned on a dark base, symbolize market microstructure and price discovery within RFQ protocols for institutional digital asset derivatives. This visualizes multi-leg spread construction, high-fidelity execution via a Principal's operational framework, ensuring atomic settlement for latent liquidity](https://options.greeks.live/wp-content/uploads/2025/07/transparent-geometric-structures-visualizing-multi-leg-spread-rfq-protocols-for-high-fidelity-institutional-digital-asset-derivatives-execution.jpg)

## Management System

The OMS codifies investment strategy into compliant, executable orders; the EMS translates those orders into optimized market interaction. </a><a href="https://prime.greeks.live/area/rfq-process/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central engineered mechanism, resembling a Prime RFQ hub, anchors four precision arms. This symbolizes multi-leg spread execution and liquidity pool aggregation for RFQ protocols, enabling high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-framework-enabling-multi-leg-spread-strategies-for-optimized-liquidity.jpg)

## Rfq Process

Meaning ▴ The RFQ Process, or Request for Quote Process, is a formalized electronic protocol utilized by institutional participants to solicit executable price quotations for a specific financial instrument and quantity from a select group of liquidity providers. </a><a href="https://prime.greeks.live/area/transaction-cost-analysis/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A metallic ring, symbolizing a tokenized asset or cryptographic key, rests on a dark, reflective surface with water droplets. This visualizes a Principal's operational framework for High-Fidelity Execution of Institutional Digital Asset Derivatives](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-institutional-digital-asset-derivatives-rfq-protocol-execution.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/order-routing-logic/?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)

## Order Routing Logic

Meaning ▴ Order Routing Logic constitutes the algorithmic framework responsible for determining the optimal destination and method for transmitting a trading order from its point of origination to a specific liquidity venue or execution endpoint. </a><a href="https://prime.greeks.live/area/order-book/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A modular, dark-toned system with light structural components and a bright turquoise indicator, representing a sophisticated Crypto Derivatives OS for institutional-grade RFQ protocols. It signifies private quotation channels for block trades, enabling high-fidelity execution and price discovery through aggregated inquiry, minimizing slippage and information leakage within dark liquidity pools](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-system-for-optimal-execution-1.jpg)

## Order Book

Meaning ▴ An Order Book is a real-time electronic ledger detailing all outstanding buy and sell orders for a specific financial instrument, organized by price level and sorted by time priority within each level. </a><a href="https://prime.greeks.live/area/market-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Polished metallic pipes intersect via robust fasteners, set against a dark background. This symbolizes intricate Market Microstructure, RFQ Protocols, and Multi-Leg Spread execution](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-metallic-nodes-illustrating-rfq-protocols-for-multi-leg-digital-asset-derivatives-institutional-execution.jpg)

## Market Data

Meaning ▴ Market Data comprises the real-time or historical pricing and trading information for financial instruments, encompassing bid and ask quotes, last trade prices, cumulative volume, and order book depth. </a><a href="https://prime.greeks.live/area/rts-28/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central toroidal structure and intricate core are bisected by two blades: one algorithmic with circuits, the other solid. This symbolizes an institutional digital asset derivatives platform, leveraging RFQ protocols for high-fidelity execution and price discovery](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-execution-hub-integrating-algorithmic-intelligence-for-high-fidelity-price-discovery-and-liquidity-aggregation.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:** [MiFID II](https://options.greeks.live/area/mifid-ii/), [Request for Quote](https://options.greeks.live/area/request-for-quote/), [Liquidity Sourcing](https://options.greeks.live/area/liquidity-sourcing/), [High-Frequency Market Data](https://options.greeks.live/area/high-frequency-market-data/), [Market Microstructure](https://options.greeks.live/area/market-microstructure/), [RTS 27](https://options.greeks.live/area/rts-27/)	

## Discover More

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### [How Can a Firm Quantitatively Prove Best Execution for a Hybrid RFQ Trade?](https://options.greeks.live/question/how-can-a-firm-quantitatively-prove-best-execution-for-a-hybrid-rfq-trade/)
![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)

Proving best execution for a hybrid RFQ requires a systemic fusion of pre-trade analytics, competitive quoting, and post-trade TCA to create an auditable, data-driven defense of execution quality.

- 
### [What Is the Role of Transaction Cost Analysis in a Global Best Execution Policy?](https://options.greeks.live/question/what-is-the-role-of-transaction-cost-analysis-in-a-global-best-execution-policy/)
![A sleek, institutional-grade RFQ engine precisely interfaces with a dark blue sphere, symbolizing a deep latent liquidity pool for digital asset derivatives. This robust connection enables high-fidelity execution and price discovery for Bitcoin Options and multi-leg spread strategies.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-crypto-derivatives-rfq-engine-linking-deep-liquidity-pools.jpg)

Transaction Cost Analysis is the quantitative engine that validates a best execution policy, transforming regulatory duty into a strategic edge.

- 
### [What Are the Key Differences in Best Execution Obligations for MTFs versus SIs?](https://options.greeks.live/question/what-are-the-key-differences-in-best-execution-obligations-for-mtfs-versus-sis/)
![A multi-layered device with translucent aqua dome and blue ring, on black. This represents an Institutional-Grade Prime RFQ Intelligence Layer for Digital Asset Derivatives. It enables high-fidelity execution through optimized RFQ protocols, facilitating precise price discovery and leveraging deep market microstructure analysis for latent liquidity access.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-intelligence-layer.jpg)

Best execution obligations diverge based on venue architecture: MTFs must ensure fair market access, while SIs must prove price fairness.

- 
### [How Does MiFID II Define Best Execution for Smart Order Routers?](https://options.greeks.live/question/how-does-mifid-ii-define-best-execution-for-smart-order-routers/)
![A sleek, metallic, X-shaped object with a central circular core floats above mountains at dusk. It signifies an institutional-grade Prime RFQ for digital asset derivatives, enabling high-fidelity execution via RFQ protocols, optimizing price discovery and capital efficiency across dark pools for best execution.](https://options.greeks.live/wp-content/uploads/2025/07/advanced-principal-rfq-protocol-architecture-for-institutional-digital-asset-derivatives-optimal-price-discovery-and-execution.jpg)

MiFID II requires SORs to systematically process multiple execution factors to demonstrably achieve the best possible client result.

- 
### [What Are the Primary Data Requirements for Building a Defensible Best Execution Dossier?](https://options.greeks.live/question/what-are-the-primary-data-requirements-for-building-a-defensible-best-execution-dossier/)
![A central metallic bar, representing an RFQ block trade, pivots through translucent geometric planes symbolizing dynamic liquidity pools and multi-leg spread strategies. This illustrates a Principal's operational framework for high-fidelity execution and atomic settlement within a sophisticated Crypto Derivatives OS, optimizing private quotation workflows.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-facilitating-high-fidelity-price-discovery-and-optimal-capital-efficiency-within-advanced-market-microstructure.jpg)

A defensible best execution dossier is a data-driven narrative substantiating optimal trade-offs between price, cost, and speed.

- 
### [How Does MiFID II Best Execution Affect RFQ Quoting?](https://options.greeks.live/question/how-does-mifid-ii-best-execution-affect-rfq-quoting/)
![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. Surrounding structures denote a robust Prime RFQ framework for high-fidelity execution and capital efficiency within market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-microstructure-optimization.jpg)

MiFID II transforms RFQ by mandating a data-driven, auditable process to systematically prove best execution for clients.

- 
### [What Are the Strategic Implications of the UK Abolishing the Share Trading Obligation?](https://options.greeks.live/question/what-are-the-strategic-implications-of-the-uk-abolishing-the-share-trading-obligation/)
![A sleek Execution Management System diagonally spans segmented Market Microstructure, representing Prime RFQ for Institutional Grade Digital Asset Derivatives. It rests on two distinct Liquidity Pools, one facilitating RFQ Block Trade Price Discovery, the other a Dark Pool for Private Quotation.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-execution-optimizing-rfq-protocols-across-segmented-liquidity-pools.jpg)

The UK's STO abolition empowers firms to architect superior execution pathways by accessing global liquidity pools.

- 
### [What Are the Primary Differences between Proving Best Execution for Lit Markets versus RFQ Protocols?](https://options.greeks.live/question/what-are-the-primary-differences-between-proving-best-execution-for-lit-markets-versus-rfq-protocols/)
![Abstract spheres and a translucent flow visualize institutional digital asset derivatives market microstructure. It depicts robust RFQ protocol execution, high-fidelity data flow, and seamless liquidity aggregation. This imagery underscores capital efficiency and atomic settlement within a Prime RFQ framework.](https://options.greeks.live/wp-content/uploads/2025/07/precision-market-microstructure-for-institutional-digital-asset-derivatives-leveraging-rfq-protocols-and-atomic-settlement-across-prime-os.jpg)

Proving best execution requires shifting from data-centric analysis in lit markets to process-centric auditing in RFQ protocols.

- 
### [What Are the Key Differences in Applying Best Execution to RFQ versus Lit Markets?](https://options.greeks.live/question/what-are-the-key-differences-in-applying-best-execution-to-rfq-versus-lit-markets/)
![A sleek, multi-layered institutional crypto derivatives platform interface, featuring a transparent intelligence layer for real-time market microstructure analysis. Buttons signify RFQ protocol initiation for block trades, enabling high-fidelity execution and optimal price discovery within a robust Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-crypto-derivatives-os-precision-execution-rfq-protocol-intelligence-layer.jpg)

Best execution demands protocol-specific analysis: statistical for lit markets, comparative for RFQ negotiations.

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---

**Original URL:** https://options.greeks.live/question/how-should-an-asset-managers-best-execution-policy-evolve-to-incorporate-systematic-internalisers/
