# What Are the Key Differences between MiFID II and the Proposed Regulation Best Execution? ▴ Question

**Published:** 2025-08-09
**Categories:** Question

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![Intricate metallic mechanisms portray a proprietary matching engine or execution management system. Its robust structure enables algorithmic trading and high-fidelity execution for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-market-microstructure.jpg)

## Concept

The operational framework for ensuring optimal client outcomes in financial markets is undergoing a significant architectural shift. At the core of this evolution are two distinct regulatory blueprints ▴ the established Markets in [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) Directive II (MiFID II) and the more recent [MiFIR review](https://prime.greeks.live/area/mifir-review/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), which introduces targeted modifications. Understanding the key differences between these two systems is fundamental for any institution seeking to maintain a compliant and efficient execution apparatus. The analysis begins not with a list of rules, but with an appreciation for the systemic pressures that drive these regulatory changes ▴ namely, the pursuit of greater transparency, the mitigation of conflicts of interest, and the adaptation to increasingly automated and fragmented trading environments.

MiFID II established a comprehensive and demanding standard for [best execution](https://prime.greeks.live/area/best-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), compelling investment firms to take all sufficient steps to obtain the best possible result for their clients. This directive moved beyond a simple focus on price and costs to include a wider set of qualitative and quantitative factors, such as speed, likelihood of execution, and settlement efficiency. The regulation mandated a rigorous, evidence-based approach, requiring firms to construct and adhere to a detailed order [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).

This policy must identify the various [execution venues](https://prime.greeks.live/question/how-does-a-best-execution-committee-quantify-and-compare-execution-quality-across-different-venues/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) a firm utilizes for different classes of financial instruments and articulate the specific factors that guide the choice of venue for any given order. The system’s design under [MiFID II](https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is one of explicit documentation and justification, creating a detailed audit trail for every execution decision.

> The transition from MiFID II to the revised MiFIR framework represents a move from broad, principles-based reporting to a more targeted and data-centric supervisory model.

The proposed changes within the MiFIR review refine this existing structure. The core obligation to achieve the best possible result for the client remains intact; however, the mechanisms for demonstrating compliance are being recalibrated. The reforms address specific challenges and market developments that have emerged since MiFID II’s implementation, such as the role of “[payment for order flow](https://prime.greeks.live/area/payment-for-order-flow/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” ([PFOF](https://prime.greeks.live/area/pfof/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)) and the complexities of obtaining a clear, consolidated view of market-wide liquidity.

The new proposals aim to streamline certain reporting obligations that were deemed overly burdensome or ineffective, while simultaneously introducing more stringent requirements in areas identified as having higher potential for investor harm. This represents a shift in regulatory focus, moving from a broad-spectrum data collection approach to a more surgical intervention in specific market practices.

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## The Philosophical Underpinnings of Each Framework

At a deeper level, the two frameworks reflect slightly different philosophies of market oversight. MiFID II can be seen as a maximalist approach, designed to capture a vast amount of data to ensure that regulators and clients could, in theory, reconstruct and scrutinize a firm’s execution process in its entirety. It placed a heavy emphasis on procedural correctness and the ex-ante design of a firm’s execution policy. The required publication of detailed reports, such as the [RTS 27](https://prime.greeks.live/area/rts-27/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) reports from execution venues and RTS 28 reports from investment firms, was intended to create a transparent marketplace where [execution quality](https://prime.greeks.live/question/how-can-pre-trade-analytics-differentiate-between-high-quality-and-low-quality-quotes-in-an-rfq-auction/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) could be compared and benchmarked.

The MiFIR review, conversely, appears to be guided by a more pragmatic, data-driven philosophy. Having observed the market’s response to MiFID II, regulators noted that some of the most data-intensive reporting requirements, particularly RTS 27, were not being utilized as intended and created substantial operational overhead. The proposed changes, therefore, seek to enhance investor protection in a more direct manner. The ban on PFOF for retail client orders is a clear example of this, directly targeting a practice seen as a significant conflict of interest.

Similarly, the push for a [consolidated tape](https://prime.greeks.live/area/consolidated-tape/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (CT) for [market data](https://prime.greeks.live/area/market-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is a direct attempt to solve the problem of data fragmentation, which complicates the process of verifying best execution in real-time. This new framework prioritizes actionable data and direct prohibitions over exhaustive, and at times theoretical, reporting.

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![Abstract depiction of an institutional digital asset derivatives execution system. A central market microstructure wheel supports a Prime RFQ framework, revealing an algorithmic trading engine for high-fidelity execution of multi-leg spreads and block trades via advanced RFQ protocols, optimizing capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-execution-system-1.jpg)

## Strategy

Adapting an institution’s operational strategy to the evolving best execution landscape requires a granular understanding of the shift from MiFID II’s comprehensive reporting model to the targeted interventions of the MiFIR review. The strategic adjustments extend beyond mere compliance, touching upon venue selection, data management, and the fundamental architecture of [order routing](https://prime.greeks.live/question/how-does-counterparty-tiering-affect-automated-order-routing-rules/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) systems. A successful strategy recognizes that the regulatory environment is moving towards a system that demands more [sophisticated internal](https://prime.greeks.live/question/what-role-do-internal-models-play-in-determining-a-commercially-reasonable-close-out-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) analytics and less reliance on standardized public reports.

Under the MiFID II framework, a key strategic pillar for firms was the development and maintenance of extensive data reporting capabilities. The RTS 27 and [RTS 28](https://prime.greeks.live/area/rts-28/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) reports, while burdensome, formed the basis of many firms’ monitoring and evidence-gathering processes. The strategy involved collecting vast quantities of data from execution venues and internal systems, processing it into the prescribed formats, and using these public disclosures to demonstrate the effectiveness of the firm’s execution policy. The choice of execution venues was heavily influenced by their ability to provide the necessary data for these reports, creating a feedback loop where reporting capability became a proxy for execution quality.

> The strategic imperative shifts from demonstrating compliance through standardized public reports to proving execution quality through sophisticated internal data analysis and more direct supervisory tools.

The MiFIR review fundamentally alters this strategic calculus. With the proposed removal of the RTS 27 reporting requirement and a significant overhaul of RTS 28, the strategic focus must pivot from external reporting to internal validation. The absence of standardized venue reports means that firms can no longer outsource part of their analytical burden. Instead, they must develop more robust internal [Transaction Cost Analysis](https://prime.greeks.live/area/transaction-cost-analysis/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) ([TCA](https://prime.greeks.live/area/tca/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)) and monitoring systems.

The strategy now centers on a firm’s ability to ingest raw market data, potentially from a future consolidated tape, and use it to independently assess the quality of execution across a range of potential venues. This requires a greater investment in data science capabilities and the technological infrastructure to support real-time, multi-factor analysis.

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

## Recalibrating Venue and Counterparty Selection

The criteria for selecting execution venues and counterparties must be recalibrated under the new regulatory paradigm. MiFID II’s framework prompted firms to build extensive lists of venues within their execution policies, often with a focus on those that provided the most comprehensive RTS 27 data. The MiFIR review, however, introduces new and more explicit considerations.

- 
**PFOF Prohibition** ▴ The ban on receiving payment for order flow for retail orders necessitates a complete re-evaluation of relationships with certain brokers and market makers. Firms whose strategies previously involved routing orders to venues that offered PFOF will need to find alternative liquidity sources and redesign their order routing logic to prioritize explicit execution quality factors over these implicit financial arrangements.

- 
**Consolidated Tape Integration** ▴ The eventual introduction of a consolidated tape for market data will become a central element of venue selection strategy. Firms will need to assess venues based on their performance relative to the consolidated, market-wide pricing and liquidity data provided by the CT. A venue’s true contribution to price discovery and liquidity provision will become more transparent, allowing for a more empirical and data-driven selection process.

- 
**Enhanced Transparency for Derivatives** ▴ The expansion of pre- and post-trade transparency requirements to include certain over-the-counter (OTC) derivatives will also influence counterparty selection. Firms will need to ensure that their chosen counterparties for these instruments are able to meet the new reporting obligations, adding a new layer of operational due diligence to the selection process.

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## Data Management and Analytical Infrastructure

A forward-looking strategy must prioritize the development of a sophisticated internal data management and analytics infrastructure. The shift away from standardized reporting places the onus of proof squarely on the investment firm. The following table outlines the key architectural shifts required:

| Capability | MiFID II Strategic Focus | MiFIR Review Strategic Focus |
| --- | --- | --- |
| Data Ingestion | Primarily focused on collecting structured RTS 27/28 data from venues and internal systems. | Building capabilities to ingest and process raw, high-volume market data feeds, including from a future consolidated tape. |
| Analytical Models | Reliance on models that could process and compare the standardized metrics found in RTS reports. | Development of advanced, multi-factor TCA models that can independently assess execution quality using raw data, considering price, speed, and likelihood of execution. |
| Reporting Output | Generation of public-facing RTS 28 reports and internal compliance summaries based on this data. | Creation of more detailed, bespoke internal reports for supervisory review, demonstrating a deep understanding of execution outcomes without reliance on public disclosures. |
| System Integration | Integration with third-party vendors for RTS report generation and management. | Deeper integration of TCA and smart order routing (SOR) systems to enable a dynamic feedback loop between analysis and execution decisions. |

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## Execution

The execution of a best execution policy under the MiFIR review demands a significant re-engineering of the operational and technological systems established under MiFID II. The focus shifts from a compliance framework centered on periodic, standardized reporting to a dynamic, evidence-based system of continuous monitoring and internal validation. This requires institutions to move beyond a check-the-box approach and embed sophisticated data analysis directly into their order management and execution workflows. The new paradigm necessitates a more proactive and technologically advanced posture to satisfy regulatory expectations.

Under MiFID II, the operational execution of best execution was heavily scaffolded by the RTS 27 and RTS 28 reporting regimes. The process for many firms involved a cyclical flow ▴ execute trades according to the established policy, collect data from execution venues, compile and publish the annual RTS 28 report summarizing top venues and execution quality, and use this output to review and validate the policy for the following year. While rigorous, this process could be somewhat static, with a heavy reliance on historical, aggregated data. The technical build was often geared towards data aggregation and report generation, sometimes at the expense of real-time analytical capabilities.

> The operational mandate evolves from periodic reporting to a state of continuous, evidence-based validation embedded within the trading lifecycle.

The MiFIR review dismantles this scaffolding and requires firms to build a more robust internal structure. The operational workflow must now be designed to capture, process, and analyze a much richer set of data on a continuous basis. The absence of RTS 27 reports from venues means that firms must source and normalize [execution data](https://prime.greeks.live/area/execution-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) themselves.

This data must then be fed into an internal analytical engine capable of benchmarking executions against market-wide data, a task that will be facilitated by the eventual arrival of a consolidated tape. The execution process becomes less about fulfilling a periodic reporting obligation and more about maintaining a constant state of readiness to demonstrate, with granular data, how any given order satisfied the best execution criteria.

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## A Comparative Procedural Framework

The practical steps involved in managing best execution differ significantly between the two regimes. The following table illustrates the procedural evolution required to adapt from the MiFID II framework to the new requirements of the MiFIR review.

| Procedural Step | MiFID II Implementation | MiFIR Review Implementation |
| --- | --- | --- |
| 1. Policy Formulation | Define execution factors and list potential venues for each instrument class. Policy is relatively static, reviewed annually. | Policy becomes a more dynamic document, incorporating rules for how the firm will use new data sources (like a CT) and explicitly prohibiting certain routing practices (like PFOF for retail). |
| 2. Pre-Trade Analysis | Smart order routers (SORs) use venue-provided data and historical performance metrics to select a destination. | SORs must be enhanced to integrate real-time, market-wide data from a CT, making routing decisions based on a live, comprehensive view of liquidity. |
| 3. Execution & Data Capture | Capture trade execution data with a focus on the fields required for RTS 28 reporting. | Capture a more extensive set of execution data, including high-frequency snapshots of the order book at the time of execution, to support more granular internal TCA. |
| 4. Post-Trade Monitoring | Primarily focused on collecting and validating RTS 27 reports from venues and preparing the annual RTS 28 report. | Involves continuous, automated analysis of execution data against market benchmarks. Exception-based alerts are generated for any executions that fall outside of expected parameters. |
| 5. Supervisory Reporting | Annual publication of the RTS 28 report, providing a summary of execution practices to the public and regulators. | Shift to on-demand, detailed reporting to supervisors. Firms must be able to produce a complete audit trail for any order, demonstrating with granular data why the chosen execution path was optimal. |

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## Building the New Analytical Engine

The core of the new execution framework is a powerful internal analytical engine. This system must be capable of performing several critical functions that were previously either less important or outsourced. The development of this engine requires a multi-disciplinary approach, combining expertise in [market microstructure](https://prime.greeks.live/area/market-microstructure/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), data engineering, and quantitative analysis.

- 
**Data Normalization Layer** ▴ This component is responsible for ingesting market data from multiple sources ▴ direct exchange feeds, data from other venues, and eventually the consolidated tape. It must normalize this data into a consistent format that can be used for analysis, accounting for differences in timestamps, symbology, and data structures.

- 
**TCA Core** ▴ This is the heart of the engine. It must contain a library of advanced TCA models capable of evaluating execution quality across multiple factors. These models should go beyond simple price improvement metrics to include measures of market impact, opportunity cost, and signaling risk. The TCA core must be able to compare an actual execution against a variety of benchmarks, such as the volume-weighted average price (VWAP) or the arrival price, calculated using the normalized market-wide data.

- 
**[Smart Order Routing](https://prime.greeks.live/area/smart-order-routing/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) Integration** ▴ The outputs of the TCA core must feed directly back into the firm’s [smart order](https://prime.greeks.live/question/can-a-smart-order-router-effectively-blend-rfq-and-dark-pool-strategies-for-a-single-large-order/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) router. This creates a closed-loop system where the analysis of past trades is used to dynamically optimize the routing decisions for future orders. For example, if the TCA engine detects that a particular venue is consistently providing poor fills for large orders in a specific stock, the SOR can automatically down-weight that venue for similar future orders.

- 
**Supervisory Reporting Module** ▴ This component must be able to generate detailed, on-demand reports for regulators. It should allow a compliance officer to select any trade executed by the firm and instantly produce a report that includes a full timeline of the order, the state of the market at the time of execution, the TCA analysis performed, and a clear explanation of why the execution met the firm’s best execution policy.

![Segmented beige and blue spheres, connected by a central shaft, expose intricate internal mechanisms. This represents institutional RFQ protocol dynamics, emphasizing price discovery, high-fidelity execution, and capital efficiency within digital asset derivatives market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-optimal-execution.jpg)

## References

- 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.

- Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012.

- European Securities and Markets Authority. (2024). “Consultation Paper on the Review of the MiFID II framework on best execution.”

- Financial Conduct Authority. (2021). “Changes to UK MiFID’s conduct and organisational requirements.”

- Lehalle, C. A. & Laruelle, S. (Eds.). (2013). Market microstructure in practice. World Scientific.

- Harris, L. (2003). Trading and exchanges ▴ Market microstructure for practitioners. Oxford University Press.

- O’Hara, M. (1995). Market Microstructure Theory. Blackwell Publishing.

- Jones, C. M. (2002). “A Century of Stock Market Liquidity and Trading Costs”. Working Paper, Columbia University.

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## Reflection

The transition in best execution regulation from MiFID II to the MiFIR review is more than a simple update of rules; it is a fundamental re-architecting of the relationship between the investment firm, the market, and the regulator. The system is evolving from one based on documented compliance to one requiring demonstrated, continuous, and data-driven intelligence. This shift compels institutions to look inward and assess the true capabilities of their execution frameworks. The question is no longer “Can we produce the required report?” but rather “Can our systems dynamically prove optimality at any given moment?”

This evolution presents an opportunity to build a genuine strategic asset. A firm that masters the new paradigm ▴ integrating real-time market-wide data, deploying sophisticated internal analytics, and creating a seamless feedback loop between analysis and execution ▴ will possess a significant operational advantage. The regulatory mandate becomes a catalyst for developing a superior execution intelligence layer.

The ultimate goal is a system so robust and transparent that its adherence to the principle of best execution is an emergent property of its design, not a laborious exercise in retrospective justification. The focus moves from a defensive posture of compliance to an offensive strategy of superior execution.

![Internal hard drive mechanics, with a read/write head poised over a data platter, symbolize the precise, low-latency execution and high-fidelity data access vital for institutional digital asset derivatives. This embodies a Principal OS architecture supporting robust RFQ protocols, enabling atomic settlement and optimized liquidity aggregation within complex market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-precision-execution-system-microstructure.jpg)

## Glossary

<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, 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)

## 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/mifir-review/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A robust circular Prime RFQ component with horizontal data channels, radiating a turquoise glow signifying price discovery. This institutional-grade RFQ system facilitates high-fidelity execution for digital asset derivatives, optimizing market microstructure and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-engine-for-digital-asset-derivatives-execution.jpg)

## Mifir Review

Meaning ▴ The MiFIR Review refers to the ongoing legislative process undertaken by the European Commission to assess and propose amendments to the Markets in Financial Instruments Regulation (MiFIR) and Directive (MiFID II). </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">
![Internal, precise metallic and transparent components are illuminated by a teal glow. This visual metaphor represents the sophisticated market microstructure and high-fidelity execution of RFQ protocols for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-microstructure-prime-os-intelligence-layer-atomic-settlement-precision.jpg)

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

## 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/question/how-does-a-best-execution-committee-quantify-and-compare-execution-quality-across-different-venues/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Symmetrical internal components, light green and white, converge at central blue nodes. This abstract representation embodies a Principal's operational framework, enabling high-fidelity execution of institutional digital asset derivatives via advanced RFQ protocols, optimizing market microstructure for price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-core.jpg)

## Execution Venues

A Best Execution Committee systematically architects superior trading outcomes by quantifying performance against multi-dimensional benchmarks and comparing venues through rigorous, data-driven analysis. </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">
![Angular translucent teal structures intersect on a smooth base, reflecting light against a deep blue sphere. This embodies RFQ Protocol architecture, symbolizing High-Fidelity Execution for Digital Asset Derivatives](https://options.greeks.live/wp-content/uploads/2025/07/dynamic-rfq-protocol-architecture-optimizing-digital-asset-derivative-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/payment-for-order-flow/?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)

## Payment for Order Flow

Meaning ▴ Payment for Order Flow (PFOF) designates the financial compensation received by a broker-dealer from a market maker or wholesale liquidity provider in exchange for directing client order flow to them for execution. </a><a href="https://prime.greeks.live/area/pfof/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Interlocked, precision-engineered spheres reveal complex internal gears, illustrating the intricate market microstructure and algorithmic trading of an institutional grade Crypto Derivatives OS. This visualizes high-fidelity execution for digital asset derivatives, embodying RFQ protocols and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-execution-system.jpg)

## Pfof

Meaning ▴ Payment for Order Flow, or PFOF, defines a compensation model where market makers provide financial remuneration to retail brokerage firms for the privilege of executing their clients' order flow. </a><a href="https://prime.greeks.live/question/how-can-pre-trade-analytics-differentiate-between-high-quality-and-low-quality-quotes-in-an-rfq-auction/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A 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)

## Execution Quality

Pre-trade analytics differentiate quotes by systematically scoring counterparty reliability and predicting execution quality beyond price. </a><a href="https://prime.greeks.live/area/rts-27/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A reflective sphere, bisected by a sharp metallic ring, encapsulates a dynamic cosmic pattern. This abstract representation symbolizes a Prime RFQ liquidity pool for institutional digital asset derivatives, enabling RFQ protocol price discovery and high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-institutional-digital-asset-derivatives-rfq-execution-1.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/consolidated-tape/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An intricate, transparent cylindrical system depicts a sophisticated RFQ protocol for digital asset derivatives. Internal glowing elements signify high-fidelity execution and algorithmic trading](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-protocol-architecture.jpg)

## Consolidated Tape

Meaning ▴ The Consolidated Tape refers to the real-time stream of last-sale price and volume data for exchange-listed securities across all U.S. </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">
![Abstract depiction of an advanced institutional trading system, featuring a prominent sensor for real-time price discovery and an intelligence layer. Visible circuitry signifies algorithmic trading capabilities, low-latency execution, and robust FIX protocol integration for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-high-fidelity-rfq-protocols.jpg)

## 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/question/what-role-do-internal-models-play-in-determining-a-commercially-reasonable-close-out-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A cutaway reveals the intricate market microstructure of an institutional-grade platform. Internal components signify algorithmic trading logic, supporting high-fidelity execution via a streamlined RFQ protocol for aggregated inquiry and price discovery within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-execution-for-digital-asset-derivatives-via-rfq-protocols.jpg)

## Sophisticated Internal

Internal models provide a structured, defensible mechanism for valuing terminated derivatives when external market data is unreliable or absent. </a><a href="https://prime.greeks.live/question/how-does-counterparty-tiering-affect-automated-order-routing-rules/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated RFQ engine module, its spherical lens observing market microstructure and reflecting implied volatility. This Prime RFQ component ensures high-fidelity execution for institutional digital asset derivatives, enabling private quotation for block trades](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-for-best-execution-protocol.jpg)

## Order Routing

Counterparty tiering embeds credit risk policy into the core logic of automated order routers, segmenting liquidity to optimize execution. </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">
![Intricate core of a Crypto Derivatives OS, showcasing precision platters symbolizing diverse liquidity pools and a high-fidelity execution arm. This depicts robust principal's operational framework for institutional digital asset derivatives, optimizing RFQ protocol processing and market microstructure for best execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-microstructure-execution-system.jpg)

## 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/transaction-cost-analysis/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated, multi-component system propels a sleek, teal-colored digital asset derivative trade. The complex internal structure represents a proprietary RFQ protocol engine with liquidity aggregation and price discovery mechanisms](https://options.greeks.live/wp-content/uploads/2025/07/principals-high-fidelity-rfq-engine-for-digital-asset-derivatives-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/tca/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, bi-component digital asset derivatives engine reveals its intricate core, symbolizing an advanced RFQ protocol. This Prime RFQ component enables high-fidelity execution and optimal price discovery within complex market microstructure, managing latent liquidity for institutional operations](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-optimal-execution.jpg)

## Tca

Meaning ▴ Transaction Cost Analysis (TCA) represents a quantitative methodology designed to evaluate the explicit and implicit costs incurred during the execution of financial trades. </a><a href="https://prime.greeks.live/area/execution-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated institutional-grade system's internal mechanics. A central metallic wheel, symbolizing an algorithmic trading engine, sits above glossy surfaces with luminous data pathways and execution triggers](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-engine-core.jpg)

## Execution Data

Meaning ▴ Execution Data comprises the comprehensive, time-stamped record of all events pertaining to an order's lifecycle within a trading system, from its initial submission to final settlement. </a><a href="https://prime.greeks.live/area/market-microstructure/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, open system showcases modular architecture, embodying an institutional-grade Prime RFQ for digital asset derivatives. Distinct internal components signify liquidity pools and multi-leg spread capabilities, ensuring high-fidelity execution via RFQ protocols for price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-modularity-unveiled.jpg)

## Market Microstructure

Meaning ▴ Market Microstructure refers to the study of the processes and rules by which securities are traded, focusing on the specific mechanisms of price discovery, order flow dynamics, and transaction costs within a trading venue. </a><a href="https://prime.greeks.live/area/smart-order-routing/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision-engineered components of an institutional-grade system. The metallic teal housing and visible geared mechanism symbolize the core algorithmic execution engine for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-institutional-digital-asset-derivatives-rfq-execution-layer.jpg)

## Smart Order Routing

Meaning ▴ Smart Order Routing is an algorithmic execution mechanism designed to identify and access optimal liquidity across disparate trading venues. </a><a href="https://prime.greeks.live/question/can-a-smart-order-router-effectively-blend-rfq-and-dark-pool-strategies-for-a-single-large-order/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Symmetrical, engineered system displays translucent blue internal mechanisms linking two large circular components. This represents an institutional-grade Prime RFQ for digital asset derivatives, enabling RFQ protocol execution, high-fidelity execution, price discovery, dark liquidity management, and atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-prime-os-core.jpg)

## Smart Order

A Smart Order Router systematically blends dark pool anonymity with RFQ certainty to minimize impact and secure liquidity for large orders. </a>

**Tags:** [RTS 27](https://options.greeks.live/area/rts-27/), [Best Execution](https://options.greeks.live/area/best-execution/), [Investment Firm Operations](https://options.greeks.live/area/investment-firm-operations/), [Market Data](https://options.greeks.live/area/market-data/), [Market Microstructure](https://options.greeks.live/area/market-microstructure/), [TCA](https://options.greeks.live/area/tca/)	

## Discover More

- 
### [What Are the Primary Regulatory Drivers for Establishing a Best Execution Committee in the US and Europe?](https://options.greeks.live/question/what-are-the-primary-regulatory-drivers-for-establishing-a-best-execution-committee-in-the-us-and-europe/)
![A dual-toned cylindrical component features a central transparent aperture revealing intricate metallic wiring. This signifies a core RFQ processing unit for Digital Asset Derivatives, enabling rapid Price Discovery and High-Fidelity Execution. It embodies an advanced Prime RFQ component, optimizing Liquidity Pool access and Market Microstructure via Algorithmic Trading.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-core-best-execution-prime-os.jpg)

The primary regulatory drivers for a Best Execution Committee are the US's "reasonable diligence" and Europe's "all sufficient steps" standards.

- 
### [What Is the Role of a Centralized Data Warehouse in Meeting Mifid Ii Best Execution Requirements?](https://options.greeks.live/question/what-is-the-role-of-a-centralized-data-warehouse-in-meeting-mifid-ii-best-execution-requirements/)
![A precision-engineered central mechanism, with a white rounded component at the nexus of two dark blue interlocking arms, visually represents a robust RFQ Protocol. This system facilitates Aggregated Inquiry and High-Fidelity Execution for Institutional Digital Asset Derivatives, ensuring Optimal Price Discovery and efficient Market Microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/centralized-hub-for-institutional-digital-asset-derivatives-rfq-protocol-aggregated-inquiry-and-optimal-price-discovery.jpg)

A centralized data warehouse is the operational core for meeting MiFID II best execution, enabling data-driven analysis and demonstrable compliance.

- 
### [How Do MiFID II Best Execution Rules Differ from US Requirements?](https://options.greeks.live/question/how-do-mifid-ii-best-execution-rules-differ-from-us-requirements/)
![Internal components of a Prime RFQ execution engine, with modular beige units, precise metallic mechanisms, and complex data wiring. This infrastructure supports high-fidelity execution for institutional digital asset derivatives, facilitating advanced RFQ protocols, optimal liquidity aggregation, multi-leg spread trading, and efficient price discovery.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-core-rfq-engine-for-institutional-digital-asset-options.jpg)

MiFID II and US best execution rules differ in their core philosophy: the EU mandates a prescriptive, data-heavy process, while the US requires a principles-based demonstration of reasonable diligence.

- 
### [What Are the Core Differences between Best Execution Requirements in the US and Europe?](https://options.greeks.live/question/what-are-the-core-differences-between-best-execution-requirements-in-the-us-and-europe/)
![Two semi-transparent, curved elements, one blueish, one greenish, are centrally connected, symbolizing dynamic institutional RFQ protocols. This configuration suggests aggregated liquidity pools and multi-leg spread constructions. The precision illustrates high-fidelity execution within a Principal's operational framework, optimizing price discovery for digital asset derivatives, navigating complex market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-price-discovery-engine.jpg)

The core difference is a philosophical one: the US requires documented "reasonable diligence," while the EU demands data-driven proof of "all sufficient steps."

- 
### [What Are the Regulatory Implications of Smart Order Routing under MiFID II?](https://options.greeks.live/question/what-are-the-regulatory-implications-of-smart-order-routing-under-mifid-ii/)
![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. A metallic button suggests precise private quotation control.](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)

MiFID II transforms SORs from latency-focused tools into auditable systems proving a firm's commitment to best execution.

- 
### [How Does MiFID II Define the Scope of Best Execution Differently than FINRA?](https://options.greeks.live/question/how-does-mifid-ii-define-the-scope-of-best-execution-differently-than-finra/)
![Abstract system interface on a global data sphere, illustrating a sophisticated RFQ protocol for institutional digital asset derivatives. The glowing circuits represent market microstructure and high-fidelity execution within a Prime RFQ intelligence layer, facilitating price discovery and capital efficiency across liquidity pools.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-execution-prime-os.jpg)

MiFID II codifies a prescriptive, data-driven "all sufficient steps" duty, while FINRA mandates a principles-based "reasonable diligence" standard.

- 
### [How Does MiFID II’s Best Execution Framework Apply Differently to Equities versus OTC Derivatives?](https://options.greeks.live/question/how-does-mifid-iis-best-execution-framework-apply-differently-to-equities-versus-otc-derivatives/)
![A polished metallic needle, crowned with a faceted blue gem, precisely inserted into the central spindle of a reflective digital storage platter. This visually represents the high-fidelity execution of institutional digital asset derivatives via RFQ protocols, enabling atomic settlement and liquidity aggregation through a sophisticated Prime RFQ intelligence layer for optimal price discovery and alpha generation.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-optimization-for-high-fidelity-execution-and-liquidity-aggregation-via-prime-os-intelligence-layer.jpg)

MiFID II's best execution applies a single principle to two different universes, demanding process optimization for equities and price validation for OTC derivatives.

- 
### [How Does MiFID II’s Best Execution Mandate Alter RFQ Counterparty Selection?](https://options.greeks.live/question/how-does-mifid-iis-best-execution-mandate-alter-rfq-counterparty-selection/)
![Transparent conduits and metallic components abstractly depict institutional digital asset derivatives trading. Symbolizing cross-protocol RFQ execution, multi-leg spreads, and high-fidelity atomic settlement across aggregated liquidity pools, it reflects prime brokerage infrastructure.](https://options.greeks.live/wp-content/uploads/2025/07/cross-protocol-rfq-execution-digital-asset-derivatives-microstructure-system.jpg)

MiFID II transforms RFQ counterparty selection into a data-driven, evidence-based discipline for proving optimal client outcomes.

- 
### [What Are the Data Sourcing Requirements for Accurate TCA under MiFID II?](https://options.greeks.live/question/what-are-the-data-sourcing-requirements-for-accurate-tca-under-mifid-ii/)
![Sleek, futuristic metallic components showcase a dark, reflective dome encircled by a textured ring, representing a Volatility Surface for Digital Asset Derivatives. This Prime RFQ architecture enables High-Fidelity Execution and Private Quotation via RFQ Protocols for Block Trade liquidity.](https://options.greeks.live/wp-content/uploads/2025/07/advanced-institutional-digital-asset-derivatives-platform-architecture-for-high-fidelity-rfq-protocol-execution-and-price-discovery.jpg)

Accurate TCA under MiFID II demands a synchronized, multi-source data architecture as the foundation for verifiable best execution.

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---

**Original URL:** https://options.greeks.live/question/what-are-the-key-differences-between-mifid-ii-and-the-proposed-regulation-best-execution/
