Master Best Execution Requirements in 2026

1. Best Execution Responsibility 

Under MiFID I, investment firms were expected to take all reasonable measures to achieve the best possible result for clients when executing their orders. MiFID II strengthened this requirement by placing greater emphasis on firms taking all sufficient steps to secure the best possible outcome.

This higher standard also increases expectations regarding the firm’s governance, monitoring arrangements, and internal controls. Investment firms are required to maintain an Order Execution Policy that is sufficiently detailed, clearly written, understandable, and consistent with the firm’s actual execution arrangements.

Having a policy in place, however, is not enough. Firms must continually evaluate whether their execution policy and related procedures remain effective. This includes assessing the fairness of prices offered to clients through the collection of relevant market data and comparisons against similar or com.parable financial instruments.

These requirements demonstrate that Best Execution should be viewed as an ongoing framework rather than a one-time compliance exercise. It encompasses controls before an order is executed, decisions made during execution, and subsequent post-trade monitoring and analysis.

2. CySEC’s Circular C343 & Best Practices to comply with Best Execution  

The Cyprus Securities and Exchange Commission (CySEC) identified a number of shortcomings in the way certain Cyprus Investment Firms (CIFs) implemented their order execution policies. Through Circular C343, CySEC called on CIFs to reassess their compliance with Best Execution requirements and take remedial action wherever weaknesses were identified. 

One of the key issues highlighted by the regulator concerned the effectiveness of compliance functions within certain regulated firms. Where compliance oversight is inadequate, firms may struggle to properly monitor their execution arrangements or identify deficiencies before they develop into regulatory concerns.

An effective compliance function therefore plays an important role in maintaining Best Execution standards. Compliance Officers should have sufficient knowledge and expertise to evaluate the firm’s existing procedures, identify potential weaknesses, challenge ineffective practices, and document both their findings and the corrective measures proposed.

A robust compliance framework should consequently provide meaningful oversight rather than simply confirm that policies and procedures exist. Firms should be able to demonstrate that their Best Execution arrangements operate effectively in practice and remain aligned with regulatory expectations.

3. Best Execution Practices 

Best Execution should be treated as a continuous monitoring and improvement process supported by reliable execution data.

CIFs should regularly collect and analyze relevant information regarding how client orders are executed. This can include examining factors such as slippage when positions are opened or closed, execution times across different asset classes, and differences between the spreads requested by clients and the spreads ultimately executed. 

Analyzing slippage over different periods, asset classes, and individual instruments can help firms identify recurring trends and determine whether execution performance remains consistent. Such analysis may also reveal potential weaknesses arising from technology, available liquidity, or the firm’s execution strategy. 

Firms should also pay close attention to rejected and requoted orders. Regular review of these transactions can help establish whether clients are being treated fairly and whether recurring technical, operational, or liquidity-related issues are affecting execution quality.

By implementing a structured approach based on the regular collection, review, and assessment of execution data, firms can develop a sustainable framework for monitoring and demonstrating Best Execution.

4. Preparation for a Best Execution Inspection 

CySEC’s inspections on best execution are typically announced within a very short notice (typically 2-3 days) and involve a detailed review of firms’ execution arrangements, governance, and monitoring processes. Interviews are usually conducted with the Risk Manager, the Heads of Dealing and Execution, the Compliance Officer, and an Executive Director. 

The regulator’s focus extends to all stages of the execution process, including the selection and review of execution venues, monitoring of order quality, stress testing of trading platforms, and the management of conflicts of interest. CySEC will also assess whether the firm’s Order Execution Policy is clear, accurate, and consistent with actual practices, and whether it is reviewed annually or when material changes occur. 

Common areas of concern include restrictions on client orders, arbitrary cancellation clauses, or asymmetric slippage practices. Firms must be able to demonstrate that best execution is achieved continuously, fairly, and consistently, regardless of client category or business model.

Maintaining compliance with Best Execution requirements is not only a regulatory necessity but can also provide commercial benefits. A well-designed framework can strengthen client confidence, improve the firm’s operational processes, and protect its reputation within the financial markets.

Final Thoughts

As financial markets continue to evolve and become more sophisticated, effective regulatory oversight remains essential for protecting investors and maintaining market confidence.

The Best Execution requirements established under MiFID II provide an important framework for achieving these objectives, while also requiring investment firms to continuously adapt their policies, procedures, monitoring systems, and reporting arrangements as regulatory expectations develop.

By maintaining an effective compliance function, addressing the expectations communicated by CySEC, and implementing robust execution monitoring and review arrangements, investment firms can establish stronger Best Execution frameworks and demonstrate their commitment to achieving fair and appropriate outcomes for clients. 

In collaboration with the Institute for Professional Excellence (IforPE), SALVUS offers a self-study CPD course “Master Best Execution Requirements in 2026.” The course is designed for professionals working in the financial services sector and provides an overview of the principal regulatory requirements and practical considerations associated with Best Execution.  

For assistance with Best Execution obligations, firms can contact SALVUS at  compliance@salvusfunds.com or explore our Master Best Execution Requirements in 2026 course for further guidance on establishing and maintaining an effective Best Execution framework.    

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The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.