# How Should Regulatory Frameworks like MiFID II Influence the Design of an RFQ Execution Policy? ▴ Question

**Published:** 2025-08-10
**Categories:** Question

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![A multi-faceted algorithmic execution engine, reflective with teal components, navigates a cratered market microstructure. It embodies a Principal's operational framework for high-fidelity execution of digital asset derivatives, optimizing capital efficiency, best execution via RFQ protocols in a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/advanced-rfq-protocol-engine-for-institutional-digital-asset-derivatives.jpg)

![A light blue sphere, representing a Liquidity Pool for Digital Asset Derivatives, balances a flat white object, signifying a Multi-Leg Spread Block Trade. This rests upon a cylindrical Prime Brokerage OS EMS, illustrating High-Fidelity Execution via RFQ Protocol for Price Discovery within Market Microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-prime-os-high-precision.jpg)

## Concept

![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)

## The Formalization of Discretionary Execution

The Markets in Financial Instruments Directive II ([MiFID II](https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)) represents a fundamental re-architecting of the European financial landscape, moving beyond mere regulatory compliance to enforce a deep, systemic transparency. For institutional trading desks, its influence on the Request for Quote (RFQ) protocol is particularly profound. The directive effectively codifies the principles of [best execution](https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), transforming what was often a relationship-driven, informal process into a structured, evidence-based, and auditable workflow.

The core of this transformation lies in the mandate that firms must take “all sufficient steps” to obtain the best possible result for their clients. This principle compels a systematic approach to liquidity sourcing, demanding that the design of an [RFQ execution policy](https://prime.greeks.live/area/rfq-execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) becomes a deliberate act of system engineering rather than a matter of trader discretion alone.

At its heart, the challenge posed by MiFID II to the traditional RFQ model is one of [demonstrable fairness](https://prime.greeks.live/area/demonstrable-fairness/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). An RFQ, by its nature, is a bilateral or semi-bilateral negotiation, a targeted solicitation for a price from a select group of [liquidity providers](https://prime.greeks.live/question/what-role-do-non-bank-liquidity-providers-play-in-offering-deep-liquidity/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This stands in contrast to the all-to-all nature of a central limit order book. The directive acknowledges the utility of such protocols, especially for large or illiquid instruments, but imposes a rigorous framework to govern them.

The design of an RFQ [execution policy](https://prime.greeks.live/question/how-should-an-order-execution-policy-balance-the-need-for-information-control-against-the-duty-of-best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), therefore, becomes an exercise in building a system that can justify its actions at every stage. It requires a firm to define, in advance, the factors that constitute “best execution” for different asset classes and client types, and then to build a process that consistently and verifiably pursues that outcome.

This regulatory pressure forces a shift in perspective. The RFQ process can no longer be a black box, even to the client. The execution policy is the blueprint for a transparent machine. It must articulate not just the ‘what’ ▴ the venues and counterparties a firm might use ▴ but the ‘why’.

Why was a particular set of dealers chosen for a specific RFQ? How was the winning quote determined to be the “best possible result” when considering factors beyond price, such as cost, speed, and likelihood of execution? The influence of MiFID II is to compel firms to answer these questions preemptively, embedding the logic of compliance directly into the operational fabric of their trading systems. The resulting [RFQ execution](https://prime.greeks.live/area/rfq-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) policy is a declaration of the firm’s methodology for navigating the trade-offs inherent in execution, making the implicit expertise of a trader an explicit and defensible part of the firm’s operational architecture.

![Precision-engineered institutional-grade Prime RFQ modules connect via intricate hardware, embodying robust RFQ protocols for digital asset derivatives. This underlying market microstructure enables high-fidelity execution and atomic settlement, optimizing capital efficiency](https://options.greeks.live/wp-content/uploads/2025/08/precision-engineered-prime-os-modules-enabling-institutional-digital-asset-derivatives-rfq-protocols-for-best-execution.jpg)

## From Implicit Trust to Explicit Validation

Historically, the efficacy of an RFQ was often predicated on the trader’s experience and their network of relationships. A client’s trust in a firm was trust in its traders’ ability to find the best price through their established channels. MiFID II systematically replaces this reliance on implicit trust with a requirement for explicit, data-driven validation. The directive mandates a level of record-keeping and reporting that makes every RFQ event a discrete, analyzable data point.

This includes capturing timestamps for the request, the quotes received, the execution, and the rationale for the chosen counterparty. This granular data collection is the bedrock upon which a compliant execution policy is built.

> A compliant RFQ execution policy under MiFID II must be a living document, continuously validated and refined by empirical data on execution quality.

The “legitimate reliance test” that emerged [under MiFID](https://prime.greeks.live/question/what-are-the-operational-consequences-of-misreporting-under-mifid-ii-versus-a-reporting-failure-under-emir/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) I and continues to inform the landscape under MiFID II is a crucial concept here. It posits that the [best execution obligation](https://prime.greeks.live/area/best-execution-obligation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is most stringent when a client is legitimately relying on the firm to protect its interests. In an RFQ context, this reliance is almost always present. Consequently, the execution policy must be designed to withstand scrutiny and demonstrate that the firm acted in the client’s best interest.

This involves creating a feedback loop where the outcomes of past RFQs inform future decisions. The policy must, therefore, incorporate a mechanism for the regular review of execution quality, assessing whether the chosen liquidity providers and venues are consistently delivering the best results. This review process, informed by both internal data and publicly available reports like those from [RTS 27](https://prime.greeks.live/area/rts-27/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and [RTS 28](https://prime.greeks.live/area/rts-28/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), ensures that the policy is not a static document but a dynamic and adaptive component of the firm’s risk management framework.

![A teal-blue textured sphere, signifying a unique RFQ inquiry or private quotation, precisely mounts on a metallic, institutional-grade base. Integrated into a Prime RFQ framework, it illustrates high-fidelity execution and atomic settlement for digital asset derivatives within market microstructure, ensuring capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-prime-os-execution-1.jpg)

![Teal and dark blue intersecting planes depict RFQ protocol pathways for digital asset derivatives. A large white sphere represents a block trade, a smaller dark sphere a hedging component](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-liquidity.jpg)

## Strategy

![Brushed metallic and colored modular components represent an institutional-grade Prime RFQ facilitating RFQ protocols for digital asset derivatives. The precise engineering signifies high-fidelity execution, atomic settlement, and capital efficiency within a sophisticated market microstructure for multi-leg spread trading](https://options.greeks.live/wp-content/uploads/2025/08/institutional-grade-digital-asset-derivatives-rfq-protocol-high-fidelity-execution-system.jpg)

## Mapping Execution Factors to RFQ Workflow Design

A strategic response to MiFID II begins with a granular mapping of the directive’s prescribed [execution factors](https://prime.greeks.live/area/execution-factors/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) to the functional design of the RFQ workflow. The regulation requires firms to weigh the relative importance of price, costs, speed, likelihood of execution and settlement, size, and nature of the order. A robust execution policy must translate these abstract factors into concrete operational parameters within the RFQ system. This is not a one-size-fits-all exercise; the strategy demands a clear segmentation by asset class, client type (retail or professional), and order characteristics.

For a liquid, standard-sized order for a professional client, price and direct costs might be paramount. For a large, illiquid block order, the likelihood of execution and minimizing market impact become the dominant strategic considerations, potentially justifying a price that is not, in isolation, the best available.

The execution policy must, therefore, function as a strategic matrix. It should pre-define the weighting of these factors under different scenarios. For instance, the policy might stipulate that for RFQs in highly volatile markets, the ‘speed of execution’ factor is given a higher weighting to mitigate slippage risk. Conversely, for a complex, multi-leg options strategy, the ‘likelihood of execution’ with a single counterparty to avoid legging risk would be the primary driver.

This strategic calibration must be embedded within the firm’s Order [Management System](https://prime.greeks.live/question/how-does-an-order-management-system-differ-from-an-execution-management-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (OMS) or [Execution Management System](https://prime.greeks.live/question/how-does-an-order-management-system-differ-from-an-execution-management-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (EMS), guiding traders or automated systems in their decision-making process. The goal is to create a system where the path to execution is not arbitrary but is a logical consequence of the policy’s strategic priorities. This approach provides a defensible rationale for every execution decision, transforming the best execution obligation from a compliance burden into a framework for disciplined, optimized trading.

![Intersecting opaque and luminous teal structures symbolize converging RFQ protocols for multi-leg spread execution. Surface droplets denote market microstructure granularity and slippage](https://options.greeks.live/wp-content/uploads/2025/07/rfq-protocols-for-digital-asset-derivatives-high-fidelity-execution.jpg)

## Counterparty Selection as a Dynamic System

MiFID II fundamentally alters the strategy for [counterparty selection](https://prime.greeks.live/area/counterparty-selection/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) in an RFQ process. The days of relying on a static list of preferred dealers are over. A compliant strategy necessitates a dynamic, data-driven system for managing and selecting liquidity providers (LPs).

The execution policy must outline the criteria for including an LP in the firm’s network and the methodology for selecting specific LPs for any given RFQ. This selection process must be demonstrably fair and designed to achieve the best possible result for the client.

This leads to the implementation of tiered or dynamic counterparty panels. A strategic policy might define several tiers of LPs based on their historical performance against the MiFID II execution factors. The system would then dynamically construct the RFQ panel based on the specific characteristics of the order.

For example, a small, liquid FX spot trade might be sent to a wide panel of Tier 1 LPs known for competitive pricing and fast response times. A large, complex emerging market bond RFQ, however, might be sent to a more select panel of Tier 2 LPs who specialize in that asset class and have demonstrated a high likelihood of providing liquidity with minimal information leakage.

> The strategic core of a MiFID II-compliant RFQ policy is the transition from static dealer lists to dynamic, performance-based liquidity provider management.

To support this dynamic system, the policy must mandate a continuous and rigorous monitoring of LP performance. This involves creating a quantitative scorecard for each LP, which becomes a critical input into the selection algorithm. The table below illustrates a conceptual framework for such a scorecard.

### Table 1 ▴ Conceptual Liquidity Provider Scorecard Framework

| Performance Metric | MiFID II Factor Alignment | Data Points to Capture | Strategic Implication |
| --- | --- | --- | --- |
| Quote Competitiveness | Price, Costs | Spread to mid-market at time of quote; Price improvement vs. arrival price. | Identifies LPs consistently offering favorable pricing. Essential for demonstrating the “price” component of best execution. |
| Response Rate & Speed | Speed, Likelihood of Execution | Percentage of RFQs responded to; Average time to quote (in milliseconds). | Prioritizes reliable and fast LPs, crucial in volatile markets or for latency-sensitive strategies. |
| Fill Rate | Likelihood of Execution | Percentage of winning quotes that result in a successful trade. | Measures the firmness of quotes, ensuring that the prices offered are actionable and reliable. |
| Post-Trade Reversion | Price, Costs (Implicit) | Analysis of market price movement immediately following a trade with the LP. | Helps identify potential market impact or information leakage associated with trading with a specific LP. |

By formalizing this evaluation process within the execution policy, a firm creates a defensible, merit-based system for counterparty interaction. It ensures that liquidity sourcing is optimized not just for a single trade, but on an ongoing basis, directly aligning the firm’s strategy with the regulatory mandate for continuous monitoring and improvement.

![A sophisticated mechanical system featuring a translucent, crystalline blade-like component, embodying a Prime RFQ for Digital Asset Derivatives. This visualizes high-fidelity execution of RFQ protocols, demonstrating aggregated inquiry and price discovery within market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-system-microstructure-1.jpg)

![A textured spherical digital asset, resembling a lunar body with a central glowing aperture, is bisected by two intersecting, planar liquidity streams. This depicts institutional RFQ protocol, optimizing block trade execution, price discovery, and multi-leg options strategies with high-fidelity execution within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-optimized-rfq-execution-protocol-dynamic-liquidity-management.jpg)

## Execution

![Metallic rods and translucent, layered panels against a dark backdrop. This abstract visualizes advanced RFQ protocols, enabling high-fidelity execution and price discovery across diverse liquidity pools for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-market-microstructure-for-institutional-digital-asset-derivatives-rfq.jpg)

## The Mandate for Demonstrable Fairness

The execution of a MiFID II-compliant [RFQ policy](https://prime.greeks.live/area/rfq-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) hinges on the principle of demonstrable fairness. Every operational step must be structured to produce a clear, auditable trail that validates the firm’s adherence to its stated policy and the overarching best execution obligation. This requires moving from abstract principles to concrete, documented procedures embedded within the trading workflow. The process begins before the RFQ is even sent, with the system codifying the logic for how a panel of liquidity providers is assembled for a specific request.

This selection must be based on the objective, data-driven criteria outlined in the strategic part of the policy, such as the LP scorecards. The policy must explicitly forbid manual overrides of the system-suggested panel without a documented, valid reason. This ensures that counterparty selection is not subject to undocumented discretion or informal relationships.

Once the RFQ is sent, the process for evaluating the returned quotes must be equally rigorous. While price is a primary factor, the execution policy must detail how other factors are incorporated into the decision, especially when the best price is not selected. For example, if a slightly off-market price is chosen due to a higher certainty of settlement (likelihood of settlement factor), the system must prompt the trader to log a specific reason code for this decision.

This creates an evidentiary record that directly links the execution outcome to the policy’s pre-defined factor weightings. The entire lifecycle of the RFQ, from panel creation to final execution, becomes a self-documenting process, providing the necessary evidence to demonstrate to clients and regulators that “all sufficient steps” were indeed taken.

The following list outlines the core procedural steps that must be embedded in the execution workflow:

- **Order Ingestion and Classification** ▴ The system must automatically classify each client order based on pre-defined criteria (asset class, size, client type) to apply the correct execution factor hierarchy from the policy.

- **System-Driven Panel Selection** ▴ Based on the order classification, the EMS/OMS automatically generates a recommended RFQ panel using the latest LP scorecard data. Any deviation from this recommendation requires mandatory justification by the trader.

- **Synchronized RFQ Dissemination** ▴ The system must ensure that the RFQ is sent to all selected LPs simultaneously to ensure a fair and level playing field for quoting.

- **Standardized Quote Evaluation** ▴ All received quotes are normalized and presented to the trader in a standardized format, alongside relevant LP performance metrics (e.g. fill rate, response speed) to provide full context for the decision.

- **Mandatory Justification for Non-Price-Based Execution** ▴ If the execution is based on factors other than the best price, the system must enforce the capture of a structured reason code, which is logged as part of the audit trail.

- **Automated Audit Trail Capture** ▴ Every action, from the initial order to the final fill, including all timestamps, quotes received (even from losing LPs), and trader justifications, must be automatically logged in a tamper-evident format.

![Precision-engineered device with central lens, symbolizing Prime RFQ Intelligence Layer for institutional digital asset derivatives. Facilitates RFQ protocol optimization, driving price discovery for Bitcoin options and Ethereum futures](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-institutional-rfq-protocol-engine-for-digital-asset-derivatives-options-trading.jpg)

## Data Architecture for Evidentiary Compliance

A compliant RFQ policy is inert without a supporting [data architecture](https://prime.greeks.live/area/data-architecture/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) capable of capturing the evidence required for validation. MiFID II’s requirements effectively mandate the creation of a comprehensive data warehouse for all execution-related activities. This architecture must be designed for the express purpose of fulfilling [post-trade transparency](https://prime.greeks.live/area/post-trade-transparency/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), best execution monitoring, and regulatory reporting obligations, such as the now-defunct but conceptually still relevant RTS 27/28 reports.

The data captured must be granular, time-stamped to the millisecond, and structured in a way that allows for easy retrieval and analysis. This is the foundational layer of demonstrable compliance.

The design of this data architecture must anticipate the questions that will be asked by regulators and clients. What was the state of the market at the moment of execution? What alternative quotes were available? Why was one [liquidity provider](https://prime.greeks.live/question/how-does-last-look-affect-the-quoting-strategy-of-a-non-bank-liquidity-provider/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) chosen over another?

The data must provide the answers. This means capturing not only the details of the executed trade but also the context surrounding it, including all competing quotes. The table below provides a detailed, though non-exhaustive, schema of the essential data points that a firm’s systems must capture for each RFQ transaction. This level of detail is what transforms a policy from a document into a verifiable operational reality.

### Table 2 ▴ Essential Data Fields for RFQ Transaction Auditing

| Data Field | Description | MiFID II Rationale | Example Value |
| --- | --- | --- | --- |
| ClientOrderID | Unique identifier for the client’s original instruction. | Links execution back to the initial client mandate. | “ORD-20250810-7465” |
| RFQ_ID | Unique identifier for the specific RFQ instance. | Groups all related messages and quotes for a single request. | “RFQ-C7B3-91A0” |
| InstrumentID | Unique identifier of the financial instrument (e.g. ISIN, CUSIP). | Ensures accurate reporting by class of instrument. | “DE000BASF111” |
| Timestamp_Request | Timestamp when the RFQ was sent to LPs. | Establishes the start of the execution process for latency analysis. | “2025-08-10T10:30:01.123Z” |
| LP_Panel | A list of all Liquidity Provider IDs included in the RFQ. | Demonstrates the breadth of the competitive process. | ” “ |
| Timestamp_Quote_LP-A | Timestamp of the quote received from LP-A. | Measures LP response speed, a key execution factor. | “2025-08-10T10:30:01.345Z” |
| Quote_Price_LP-A | The price quoted by LP-A. | Core data for price comparison. | “101.52” |
| Winning_LP_ID | The identifier of the liquidity provider who won the auction. | Identifies the execution counterparty. | “LP-C” |
| Execution_Timestamp | Timestamp when the trade was executed. | Measures total execution latency (from request to fill). | “2025-08-10T10:30:01.567Z” |
| Execution_Price | The final price at which the trade was executed. | The primary measure for the “price” factor of best execution. | “101.50” |
| Execution_Justification_Code | A code indicating the reason for execution if not the best price. | Provides auditable rationale for decisions based on other factors. | “SIZE_CERTAINTY” |

![A central glowing core within metallic structures symbolizes an Institutional Grade RFQ engine. This Intelligence Layer enables optimal Price Discovery and High-Fidelity Execution for Digital Asset Derivatives, streamlining Block Trade and Multi-Leg Spread Atomic Settlement](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-microstructure-core.jpg)

## Systemic Integration within the Execution Management System

The final stage of execution is the deep integration of the RFQ policy’s logic into the firm’s technological infrastructure, primarily the Execution Management System (EMS). The policy cannot live on a shelf; it must become an active component of the trading system’s code. This integration ensures that the procedural steps and data capture requirements are not manual afterthoughts but are enforced systematically at the point of trade.

For example, the EMS should be configured to prevent an RFQ from being sent if the trader has not selected a panel that meets the policy’s diversity or quality score requirements for that specific instrument type. This represents a hard-coding of compliance checks into the pre-trade workflow.

This systemic integration also extends to the communication protocols used. The Financial Information eXchange (FIX) protocol, the lingua franca of electronic trading, can be leveraged to carry the necessary data. Custom FIX tags can be used to populate the audit trail with policy-specific information, such as the RFQ_ID or the justification codes for execution decisions. The EMS should be configured to automatically log these FIX messages, creating a rich, structured, and immutable record of the entire RFQ lifecycle.

This ensures that the data required for post-trade analysis and reporting is captured accurately and efficiently, without relying on manual data entry, which is prone to error. By weaving the execution policy into the technological fabric of the firm, compliance becomes an intrinsic property of the trading process itself, rather than an external constraint imposed upon it.

![A translucent institutional-grade platform reveals its RFQ execution engine with radiating intelligence layer pathways. Central price discovery mechanisms and liquidity pool access points are flanked by pre-trade analytics modules for digital asset derivatives and multi-leg spreads, ensuring high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-core-platform.jpg)

## References

- European Parliament and Council of the European Union. “Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU.” Official Journal of the European Union, 2014.

- European Commission. “Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive.” Official Journal of the European Union, 2017.

- FIX Trading Community. “FIX MiFID II Best Execution Reporting Recommended Practices RTS 27 & 28.” 2017.

- Dechert LLP. “MiFID II ▴ Best execution.” Dechert OnPoint, 2017.

- Swedish Securities Dealers Association. “Guide for drafting/review of Execution Policy under MiFID II.” 2018.

- International Capital Market Association (ICMA). “MiFID II/R Fixed Income Best Execution Requirements.” 2017.

- ESMA. “Final Report on the Technical Standards specifying the criteria for establishing and assessing the effectiveness of investment firms’ order execution policies.” ESMA35-335435667-6253, 2025.

- Harris, Larry. “Trading and Exchanges ▴ Market Microstructure for Practitioners.” Oxford University Press, 2003.

![Robust polygonal structures depict foundational institutional liquidity pools and market microstructure. Transparent, intersecting planes symbolize high-fidelity execution pathways for multi-leg spread strategies and atomic settlement, facilitating private quotation via RFQ protocols within a controlled dark pool environment, ensuring optimal price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-microstructure-prime-os.jpg)

## Reflection

![A luminous, multi-faceted geometric structure, resembling interlocking star-like elements, glows from a circular base. This represents a Prime RFQ for Institutional Digital Asset Derivatives, symbolizing high-fidelity execution of block trades via RFQ protocols, optimizing market microstructure for price discovery and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-system.jpg)

## The Policy as a System of Intelligence

The construction of an RFQ [execution policy under](https://prime.greeks.live/question/how-should-a-firms-execution-policy-adapt-for-different-asset-classes-under-mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) the strictures of MiFID II transcends the act of mere documentation. It is the articulation of a firm’s core philosophy on execution quality, risk management, and client duty. The framework compels a move away from isolated decisions and towards a holistic, systemic view of trading. The resulting policy is a system of intelligence, a dynamic framework that not only governs actions but also learns from their outcomes.

It embeds a continuous feedback loop into the heart of the execution process, where data from every trade refines the logic for the next. This transforms the regulatory mandate from a prescriptive burden into a catalyst for operational excellence.

Ultimately, the true value of this exercise lies in the capabilities it builds within the firm. The process of designing, implementing, and maintaining a data-driven execution policy cultivates a culture of precision and accountability. It forces a rigorous, quantitative understanding of liquidity sources and execution outcomes.

The knowledge gained through this process becomes a strategic asset, enabling the firm to navigate complex markets with greater control and insight. The policy itself is a component, a critical piece of a much larger operational architecture designed to achieve a singular goal ▴ superior, defensible, and intelligent execution.

![Precision metallic mechanism with a central translucent sphere, embodying institutional RFQ protocols for digital asset derivatives. This core represents high-fidelity execution within a Prime RFQ, optimizing price discovery and liquidity aggregation for block trades, ensuring capital efficiency and atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-prime-os-execution-hub.jpg)

## Glossary

<a href="https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Sharp, intersecting elements, two light, two teal, on a reflective disc, centered by a precise mechanism. This visualizes institutional liquidity convergence for multi-leg options strategies in digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-block-trade-execution.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/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![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)

## 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/rfq-execution-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A crystalline droplet, representing a block trade or liquidity pool, rests precisely on an advanced Crypto Derivatives OS platform. Its internal shimmering particles signify aggregated order flow and implied volatility data, demonstrating high-fidelity execution and capital efficiency within market microstructure, facilitating private quotation via RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-protocol-best-execution.jpg)

## Rfq Execution Policy

Meaning ▴ An RFQ Execution Policy defines the precise, systematic rules governing an institutional participant's interaction with and response to Request for Quote (RFQ) streams for digital asset derivatives. </a><a href="https://prime.greeks.live/area/demonstrable-fairness/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precisely engineered central blue hub anchors segmented grey and blue components, symbolizing a robust Prime RFQ for institutional trading of digital asset derivatives. This structure represents a sophisticated RFQ protocol engine, optimizing liquidity pool aggregation and price discovery through advanced market microstructure for high-fidelity execution and private quotation](https://options.greeks.live/wp-content/uploads/2025/08/prime-os-digital-asset-derivatives-rfq-execution-core-systemic-hub.jpg)

## Demonstrable Fairness

Meaning ▴ Demonstrable Fairness defines a verifiable and auditable condition within a trading system or protocol where all participants are afforded equitable opportunities for execution and price discovery, based on predefined, transparent rules. </a><a href="https://prime.greeks.live/question/what-role-do-non-bank-liquidity-providers-play-in-offering-deep-liquidity/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, spherical white and blue module featuring a central black aperture and teal lens, representing the core Intelligence Layer for Institutional Trading in Digital Asset Derivatives. It visualizes High-Fidelity Execution within an RFQ protocol, enabling precise Price Discovery and optimizing the Principal's Operational Framework for Crypto Derivatives OS](https://options.greeks.live/wp-content/uploads/2025/07/precision-lens-for-institutional-digital-asset-derivatives-rfq-execution.jpg)

## Liquidity Providers

Non-bank liquidity providers function as specialized processing units in the market's architecture, offering deep, automated liquidity. </a><a href="https://prime.greeks.live/question/how-should-an-order-execution-policy-balance-the-need-for-information-control-against-the-duty-of-best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, pointed object, merging light and dark modular components, embodies advanced market microstructure for digital asset derivatives. Its precise form represents high-fidelity execution, price discovery via RFQ protocols, emphasizing capital efficiency, institutional grade alpha generation](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-digital-asset-rfq-execution-system-microstructure.jpg)

## Execution Policy

An Order Execution Policy architects the trade-off between information control and best execution to protect value while seeking liquidity. </a><a href="https://prime.greeks.live/area/rfq-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Three sensor-like components flank a central, illuminated teal lens, reflecting an advanced RFQ protocol system. This represents an institutional digital asset derivatives platform's intelligence layer for precise price discovery, high-fidelity execution, and managing multi-leg spread strategies, optimizing market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-for-optimal-execution.jpg)

## Rfq Execution

Meaning ▴ RFQ Execution refers to the systematic process of requesting price quotes from multiple liquidity providers for a specific financial instrument and then executing a trade against the most favorable received quote. </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">
![A precise mechanical instrument with intersecting transparent and opaque hands, representing the intricate market microstructure of institutional digital asset derivatives. This visual metaphor highlights dynamic price discovery and bid-ask spread dynamics within RFQ protocols, emphasizing high-fidelity execution and latent liquidity through a robust Prime RFQ for atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineering-driving-institutional-digital-asset-derivatives-execution-across-advanced-rfq-protocols-and-prime-brokerage-frameworks.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/question/what-are-the-operational-consequences-of-misreporting-under-mifid-ii-versus-a-reporting-failure-under-emir/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision-engineered, multi-layered system visually representing institutional digital asset derivatives trading. Its interlocking components symbolize robust market microstructure, RFQ protocol integration, and high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-high-fidelity-execution-4.jpg)

## Under Mifid

A MiFID II misreport corrupts market surveillance data; an EMIR failure hides systemic risk, creating distinct operational and reputational threats. </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 sleek, translucent fin-like structure emerges from a circular base against a dark background. This abstract form represents RFQ protocols and price discovery in digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-protocol.jpg)

## Rts 27

Meaning ▴ RTS 27 mandates that investment firms and market operators publish detailed data on the quality of execution of transactions on their venues. </a><a href="https://prime.greeks.live/area/rts-28/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central blue sphere, representing a Liquidity Pool, balances on a white dome, the Prime RFQ. Perpendicular beige and teal arms, embodying RFQ protocols and Multi-Leg Spread strategies, extend to four peripheral blue elements](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-digital-asset-derivatives-rfq-protocol-execution-framework.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><a href="https://prime.greeks.live/area/execution-factors/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A disaggregated institutional-grade digital asset derivatives module, off-white and grey, features a precise brass-ringed aperture. It visualizes an RFQ protocol interface, enabling high-fidelity execution, managing counterparty risk, and optimizing price discovery within market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-protocol-modular-execution-intelligence-system.jpg)

## Execution Factors

Meaning ▴ Execution Factors are the quantifiable, dynamic variables that directly influence the outcome and quality of a trade execution within institutional digital asset markets. </a><a href="https://prime.greeks.live/question/how-does-an-order-management-system-differ-from-an-execution-management-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A metallic disc, reminiscent of a sophisticated market interface, features two precise pointers radiating from a glowing central hub. This visualizes RFQ protocols driving price discovery within institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-price-discovery.jpg)

## Execution Management System

An Order Management System governs portfolio strategy and compliance; an Execution Management System masters market access and trade execution. </a><a href="https://prime.greeks.live/question/how-does-an-order-management-system-differ-from-an-execution-management-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![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](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-prime-os-execution-system.jpg)

## Management System

An Order Management System governs portfolio strategy and compliance; an Execution Management System masters market access and trade execution. </a><a href="https://prime.greeks.live/area/counterparty-selection/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Segmented circular object, representing diverse digital asset derivatives liquidity pools, rests on institutional-grade mechanism. Central ring signifies robust price discovery a diagonal line depicts RFQ inquiry pathway, ensuring high-fidelity execution via Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-for-high-fidelity-execution.jpg)

## Counterparty Selection

Meaning ▴ Counterparty selection refers to the systematic process of identifying, evaluating, and engaging specific entities for trade execution, risk transfer, or service provision, based on predefined criteria such as creditworthiness, liquidity provision, operational reliability, and pricing competitiveness within a digital asset derivatives ecosystem. </a><a href="https://prime.greeks.live/area/rfq-policy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision-engineered metallic component displays two interlocking gold modules with circular execution apertures, anchored by a central pivot. This symbolizes an institutional-grade digital asset derivatives platform, enabling high-fidelity RFQ execution, optimized multi-leg spread management, and robust prime brokerage liquidity](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-core-for-institutional-trade-flow.jpg)

## Rfq Policy

Meaning ▴ An RFQ Policy defines the structured rules and operational parameters governing the Request for Quote mechanism within an electronic trading system, specifically for illiquid or bespoke instruments like institutional digital asset derivatives. </a><a href="https://prime.greeks.live/area/post-trade-transparency/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract, sleek forms represent an institutional-grade Prime RFQ for digital asset derivatives. Interlocking elements denote RFQ protocol optimization and price discovery across dark pools](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-5.jpg)

## Post-Trade Transparency

Meaning ▴ Post-Trade Transparency defines the public disclosure of executed transaction details, encompassing price, volume, and timestamp, after a trade has been completed. </a><a href="https://prime.greeks.live/area/data-architecture/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A segmented teal and blue institutional digital asset derivatives platform reveals its core market microstructure. Internal layers expose sophisticated algorithmic execution engines, high-fidelity liquidity aggregation, and real-time risk management protocols, integral to a Prime RFQ supporting Bitcoin options and Ethereum futures trading](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-core-microstructure.jpg)

## Data Architecture

Meaning ▴ Data Architecture defines the formal structure of an organization's data assets, establishing models, policies, rules, and standards that govern the collection, storage, arrangement, integration, and utilization of data. </a><a href="https://prime.greeks.live/question/how-does-last-look-affect-the-quoting-strategy-of-a-non-bank-liquidity-provider/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A multi-faceted crystalline structure, featuring sharp angles and translucent blue and clear elements, rests on a metallic base. This embodies Institutional Digital Asset Derivatives and precise RFQ protocols, enabling High-Fidelity Execution](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-digital-asset-derivatives-rfq-market-microstructure.jpg)

## Liquidity Provider

Last look allows non-bank LPs to quote tighter spreads by providing a final check to reject trades on stale, unprofitable prices. </a><a href="https://prime.greeks.live/question/how-should-a-firms-execution-policy-adapt-for-different-asset-classes-under-mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A dual-toned cylindrical component features a central transparent aperture revealing intricate metallic wiring. This signifies a core RFQ processing unit for Digital Asset Derivatives, enabling rapid Price Discovery and High-Fidelity Execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-core-best-execution-prime-os.jpg)

## Execution Policy Under

A firm's execution policy under MiFID II must be a dynamic, multi-faceted framework tailored to the unique microstructure of each asset class. </a>

**Tags:** [RTS 27](https://options.greeks.live/area/rts-27/), [Post-Trade Transparency](https://options.greeks.live/area/post-trade-transparency/), [Data Architecture](https://options.greeks.live/area/data-architecture/), [RTS 28](https://options.greeks.live/area/rts-28/), [RFQ Execution](https://options.greeks.live/area/rfq-execution/), [Order Execution Policy](https://options.greeks.live/area/order-execution-policy/)	

## Discover More

- 
### [How Does MiFID II Define the Concept of Best Execution for Different Asset Classes?](https://options.greeks.live/question/how-does-mifid-ii-define-the-concept-of-best-execution-for-different-asset-classes/)
![Abstractly depicting an Institutional Digital Asset Derivatives ecosystem. A robust base supports intersecting conduits, symbolizing multi-leg spread execution and smart order routing. Floating spheres represent diverse liquidity pools and crypto derivatives, emphasizing market microstructure and capital efficiency via RFQ protocols.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-engine-optimization.jpg)

MiFID II defines best execution as a verifiable system for taking all sufficient steps to achieve the optimal result for a client's order.

- 
### [What Are the Primary Best Execution Obligations When Executing an RFQ with a Systematic Internaliser?](https://options.greeks.live/question/what-are-the-primary-best-execution-obligations-when-executing-an-rfq-with-a-systematic-internaliser/)
![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)

Fulfilling best execution for an SI RFQ requires a data-driven, auditable process proving the chosen bilateral quote was the optimal outcome.

- 
### [What Are the Regulatory Implications of Systematically Documenting RFQ Execution Quality through TCA?](https://options.greeks.live/question/what-are-the-regulatory-implications-of-systematically-documenting-rfq-execution-quality-through-tca/)
![A slender metallic probe extends between two curved surfaces. This abstractly illustrates high-fidelity execution for institutional digital asset derivatives, driving price discovery within market microstructure. It represents Prime RFQ protocol precision navigating dark liquidity for best execution and capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/precision-instrument-navigating-institutional-digital-asset-derivatives-rfq-protocols-for-optimal-price-discovery-and-high-fidelity-execution.jpg)

Systematically documenting RFQ execution via TCA is the regulatory imperative to provide empirical proof of best execution.

- 
### [What Are the Primary Differences in Best Execution Obligations between FINRA and MiFID II Frameworks?](https://options.greeks.live/question/what-are-the-primary-differences-in-best-execution-obligations-between-finra-and-mifid-ii-frameworks/)
![A multi-faceted algorithmic execution engine, reflective with teal components, navigates a cratered market microstructure. It embodies a Principal's operational framework for high-fidelity execution of digital asset derivatives, optimizing capital efficiency, best execution via RFQ protocols in a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/advanced-rfq-protocol-engine-for-institutional-digital-asset-derivatives.jpg)

FINRA requires documented "reasonable diligence," while MiFID II mandates a more prescriptive, data-driven proof of "all sufficient steps."

- 
### [How Do MiFID II Best Execution Requirements Apply to Automated RFQ Systems?](https://options.greeks.live/question/how-do-mifid-ii-best-execution-requirements-apply-to-automated-rfq-systems/)
![A sleek, light-colored, egg-shaped component precisely connects to a darker, ergonomic base, signifying high-fidelity integration. This modular design embodies an institutional-grade Crypto Derivatives OS, optimizing RFQ protocols for atomic settlement and best execution within a robust Principal's operational framework, enhancing market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-core-principal-system.jpg)

MiFID II mandates that RFQ systems create a competitive, auditable environment to prove best execution was achieved.

- 
### [How Do Regulatory Frameworks like MiFID II Define the Factors of Best Execution?](https://options.greeks.live/question/how-do-regulatory-frameworks-like-mifid-ii-define-the-factors-of-best-execution/)
![A metallic, modular trading interface with black and grey circular elements, signifying distinct market microstructure components and liquidity pools. A precise, blue-cored probe diagonally integrates, representing an advanced RFQ engine for granular price discovery and atomic settlement of multi-leg spread strategies in institutional digital asset derivatives. This optimizes capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-system-facilitating-high-fidelity-execution-price-discovery.jpg)

MiFID II defines best execution as a mandate for firms to use all sufficient steps to obtain the optimal result for clients.

- 
### [How Do Regulatory Frameworks like MiFID II and TRACE Shape RFQ System Design?](https://options.greeks.live/question/how-do-regulatory-frameworks-like-mifid-ii-and-trace-shape-rfq-system-design/)
![Precision-engineered institutional-grade Prime RFQ component, showcasing a reflective sphere and teal control. This symbolizes RFQ protocol mechanics, emphasizing high-fidelity execution, atomic settlement, and capital efficiency in digital asset derivatives market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-precision-execution-system-design.jpg)

MiFID II and TRACE mandate a data-centric architecture for RFQ systems, transforming compliance into a framework for proving best execution.

- 
### [What Are the Key Differences between MiFID II and Regulation NMS regarding Best Execution?](https://options.greeks.live/question/what-are-the-key-differences-between-mifid-ii-and-regulation-nms-regarding-best-execution/)
![Stacked precision-engineered circular components, varying in size and color, rest on a cylindrical base. This modular assembly symbolizes a robust Crypto Derivatives OS architecture, enabling high-fidelity execution for institutional RFQ protocols. It embodies layered liquidity aggregation, optimized price discovery within market microstructure, and capital efficiency for digital asset derivatives.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-protocol-architecture-optimized-for-high-fidelity-execution.jpg)

MiFID II mandates a holistic, principles-based approach to best execution, while Regulation NMS prioritizes a rules-based, price-centric framework.

- 
### [Can a Firm Justify Prioritizing Speed over Price under MiFID II, and What Evidence Is Required?](https://options.greeks.live/question/can-a-firm-justify-prioritizing-speed-over-price-under-mifid-ii-and-what-evidence-is-required/)
![Intricate metallic components signify system precision engineering. These structured elements symbolize institutional-grade infrastructure for high-fidelity execution of digital asset derivatives. Mechanics highlight RFQ protocol efficiency, atomic settlement, and robust market microstructure for optimal price discovery within a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-precision-engineering-for-high-fidelity-execution-and-latency-optimization.jpg)

A firm can justify prioritizing speed over price under MiFID II by evidencing a systematic policy that proves this approach serves the client's best interest.

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---

**Original URL:** https://options.greeks.live/question/how-should-regulatory-frameworks-like-mifid-ii-influence-the-design-of-an-rfq-execution-policy/
