MiFID II Best Execution: New Requirements for Order Execution Policies - Get prepared ahead

Introduction

Commission Delegated Regulation (EU) 2026/825 introduces new Regulatory Technical Standards concerning the establishment, implementation and assessment of investment firms’ Order Execution Policies under MiFID II.

The Regulation was published in the Official Journal of the European Union on 23 July 2026, enters into force on 12 August 2026 and will apply from 12 February 2028.

It represents an important development in the EU best execution framework, introducing significantly more detailed requirements regarding execution-venue selection, order-routing arrangements, execution-quality monitoring, governance and the assessment of whether firms consistently achieve the best possible result for their clients.

The best execution obligation remains unchanged

Investment firms remain subject to the obligation under Article 27 of MiFID II to take all sufficient steps to obtain the best possible result for their clients.

In doing so, firms must consider relevant execution factors, including:

• price;

• costs;

• speed;

• likelihood of execution and settlement;

• size;

• nature of the order; and

• any other consideration relevant to its execution.

Commission Delegated Regulation (EU) 2026/825 does not change this fundamental obligation. Instead, it establishes a more structured framework for demonstrating how the obligation is embedded within a firm’s policies, governance arrangements, execution processes and monitoring systems.

Key requirements under the new Regulation

Governance over the selection of execution venues

Investment firms will be required to describe within their Order Execution Policy the internal governance procedures applied when selecting execution venues.

Firms must also maintain an internal and up-to-date list of approved execution venues. The list should include relevant information concerning:

• the identity of the venue;

• the date on which it was approved;

• the person or governance body responsible for its approval;

• the classes of financial instruments for which it may be used;

• the types of transactions permitted;

• the relevant client categories; and

• any applicable restrictions or limitations.

This introduces clearer expectations regarding ownership, accountability, approval and periodic review of execution-venue arrangements.

More structured venue-selection criteria

The selection of execution venues must be based on an assessment of the characteristics and needs of the firm’s clients, as well as the characteristics of the relevant financial instruments and orders.

Relevant considerations may include:

• the order types supported by the venue;

• typical client order sizes and frequency;

• available execution prices;

• trading and membership costs;

• connectivity costs;

• clearing, settlement and custody costs; and

• other administrative or operational costs associated with using the venue.

Where costs incurred by the investment firm are passed on to clients, whether directly or indirectly, those costs must also be considered in the venue-selection process.

Use of reliable reference and market data

The Regulation places increased emphasis on the quality of data used to select venues and assess execution outcomes. Investment firms must use reliable and accurate reference data that provides a sufficiently complete representation of available market prices and execution conditions.

The data used should include information from the most liquid venues relevant to the applicable class of financial instruments.

Where available and appropriate, firms may also use consolidated market data. For instruments executed outside a trading venue, including bespoke or less liquid products, firms must use appropriate data to assess whether the proposed price is fair and supports the best possible result for the client.

Single-venue execution arrangements

Where an investment firm uses only one execution venue for a particular class of financial instruments, the Order Execution Policy must explain how that venue enables the firm to obtain the best possible result for clients on a consistent basis.

Firms must be able to substantiate this conclusion and periodically compare the execution outcomes achieved through the selected venue against those potentially available through alternative venues.

This requirement is particularly relevant to firms that rely on:

• a single broker;

• a single liquidity provider;

• a group company;

• a single market maker; or

• another exclusive execution counterparty.

A single-venue model is not prohibited, but it must be supported by an objective, documented and periodically reviewed assessment.

Clear order-routing methodology

Where more than one execution venue is available, the firm must establish the criteria used to determine where individual client orders will be executed.

The Order Execution Policy must explain the relative importance assigned to the relevant execution factors and how those factors are applied in practice.

The assessment should take into account matters such as:

• the class of financial instrument;

• whether the client is retail or professional;

• the costs directly associated with execution;

• the size and nature of the order;

• prevailing market conditions; and

• current and historical execution data.

Where automatic order-routing systems are used, the policy should explain the principal characteristics of the system and the controls ensuring that the routing methodology properly reflects the firm’s best execution obligations.

Specific client instructions

The Order Execution Policy must clearly explain what constitutes a specific instruction from a client and how such an instruction may affect the firm’s ability to apply its standard execution arrangements.

Where the instruction relates only to a particular element of the order, only that element should be treated as subject to the client’s instruction.

The firm must continue to apply its Order Execution Policy to all remaining elements of the order.

Firms should therefore avoid treating a limited client instruction as removing the best execution obligation in respect of the entire transaction.

Dealing on own account and OTC execution

Investment firms executing client orders by dealing on own account must explain how they ensure that clients continue to receive the best possible result.

The Order Execution Policy should address:

• how the execution outcome is assessed;

• how conflicts of interest are identified and managed;

• how potential risks or disadvantages to the client are evaluated; and

• how the fairness of the proposed price is verified.

For financial instruments executed outside a trading venue, firms must compare the proposed price against relevant market information, comparable transactions or similar financial instruments. Where reliable external pricing information is unavailable, the firm should use an appropriate internal valuation or pricing model based on accurate and reliable market data.

Quantitative monitoring of execution quality

The Regulation introduces more structured expectations for the ongoing monitoring of execution outcomes.

For representative samples within each class of financial instruments, firms will need to establish predetermined indicators and thresholds against which execution quality can be assessed. These may include:

• acceptable deviations between execution prices and relevant reference prices;

• the proportion of executed volume meeting predetermined execution standards;

• the number or percentage of client orders meeting the applicable thresholds;

• execution speed;

• likelihood of execution;

• settlement performance; and

• total execution costs.

The monitoring framework should be capable of identifying material exceptions, deteriorating execution quality and situations in which the firm may no longer be obtaining the best possible result consistently. This will require firms to move beyond high-level or primarily narrative policy reviews and establish measurable, data-supported monitoring arrangements.

Annual and event-driven effectiveness assessments

Investment firms must assess the effectiveness of their Order Execution Policy and execution arrangements at least annually.

An additional assessment must be carried out where:

• monitoring identifies a material deficiency;

• a material change affects the firm’s ability to achieve best execution;

• market or liquidity conditions change significantly;

• a new execution venue or execution functionality becomes available;

• relevant fee structures change;

• liquidity shifts between venues;

• an existing venue ceases operating, merges or becomes unavailable; or

• another development materially affects the firm’s execution arrangements.

The assessment should examine whether the venues included in the policy continue to support the best possible result and whether the firm’s routing methodology, monitoring indicators and governance controls remain effective.

Any identified deficiencies must be addressed as soon as reasonably possible, taking into account their seriousness and potential impact on clients.

Practical implications for investment firms

Although the Regulation will apply from 12 February 2028, firms should not underestimate the implementation work that may be required.

The new requirements may affect not only the wording of the Order Execution Policy, but also the underlying operational, technological and governance arrangements through which orders are routed, executed, monitored and reviewed. Investment firms should consider:

1. performing a detailed gap assessment against Commission Delegated Regulation (EU) 2026/825;

2. reviewing the governance and approval process for execution venues;

3. establishing or updating the internal inventory of approved venues;

4. documenting the methodology used to select and periodically reassess venues;

5. reviewing arrangements involving a single broker, venue or liquidity provider;

6. evaluating the availability, quality and completeness of execution and reference data;

7. developing quantitative execution-quality indicators and thresholds;

8. reviewing automatic order-routing logic and related controls;

9. strengthening OTC price-fairness and valuation procedures;

10. updating the methodology for annual and event-driven effectiveness assessments;

11. establishing clear escalation and remediation procedures for identified deficiencies; and

12. assessing whether related client disclosures, procedures and governance documents require amendment.

    
    

A shift towards demonstrable best execution

The new framework reinforces the expectation that best execution must be demonstrable in practice and not merely described at a policy level.

Investment firms will be expected to show, through appropriate governance, data, quantitative analysis, documented decisions and effective monitoring, that their execution arrangements are designed and operated to achieve the best possible result for clients on a consistent basis.

The implementation period therefore provides an opportunity for firms to review not only their formal Order Execution Policy, but the complete control framework supporting venue selection, order routing, pricing, monitoring, escalation and governance.

Early preparation will be particularly important for firms with limited execution data, single-venue arrangements, manual monitoring processes or significant reliance on third-party brokers and liquidity providers.

This publication is provided for general information purposes only and does not constitute legal, regulatory or other professional advice.