Master Best Execution Requirements in 2025

1. Best Execution Responsibility 

Under MiFID I, firms were required to take all reasonable steps to obtain the best possible result when executing client orders. MiFID II raises the standard to all sufficient steps, elevating expectations for design, monitoring and governance. Additionally, firms must produce an Order Execution Policy that is clear, sufficiently detailed with an understandable manner and must be aligned with the firm’s internal practices. This leaves an obligation to firms to monitor the effectiveness of their policy and arrangements on a continuous basis and to assess the fairness of prices offered to clients by gathering market data and benchmarking against comparable products.  

According to RTS 27, investment firms are required to publish, on a quarterly basis, data analyses on the quality of execution for each category of financial instrument. What is more, RTS 28 obliges firms to publish, annually, their top execution venues together with a summary of the analysis performed on execution quality. These obligations underline that best execution is a continuous process in encompassing pre-trade controls, decision-making at execution, and post-trade analysis. 

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

The Cyprus Securities and Exchange Commission (CySEC) has highlighted critical weaknesses in the implementation of order execution policies among Cyprus Investment Firms (CIFs). Therefore, in Circular C343, CySEC urges all CIFs to reassess their compliance with best execution obligations and, where necessary, implement corrective measures. 

A significant observation from CySEC is the lack of effective compliance functions within several CIF regulated entities. This deficiency often results in insufficient oversight of monitoring procedures and inability to meet regulatory standards for best execution. To address this issue and achieve best execution, it is essential for Compliance Officers to possess the expertise needed to identify weaknesses, critically assess existing procedures, and document their findings along with recommended corrective actions.  

3. Best Execution Practices 

Best execution is ultimately a process that requires continuous data collection, assessment, and improvement. CIFs should regularly monitor and analyse execution data such as slippage at order open and close, execution speed per asset class, and the comparison between requested and executed spreads.

Evaluating slippage trends by day, class, and instrument helps identify whether execution performance is consistent and whether any patterns point to deficiencies in technology, liquidity, or execution strategy. Regular analysis of rejected and requoted orders is also essential, ensuring that clients receive fair treatment and that potential technical or operational issues are promptly addressed. 

By adopting a systematic and evidence-based approach to monitoring, firms can build a sustainable framework for achieving and maintaining best execution. 

4. RTS 27 & 28 and the new requirements 

In September 2021, the European Securities and Markets Authority (ESMA) as part of its consultation paper on its review of the MiFID II framework, identified critical weaknesses with the Regulatory Technical Standards (RTS) 27 & 28 reports. RTS 27 & 28 reports are part of the best execution obligations of investment firms in the Union and consequently of CIF.  

The weaknesses identified in RTS 27 included limited accessibility to reports, which were only available upon request. Once accessed, the reports contained a large volume of data and exhibited inconsistencies across different venues. ESMA’s consultation paper proposed simplifying this process by focusing on a limited set of indicators while ensuring harmonised and easily accessible reporting via EU Single Point of Access (ESAP).  Moreover, regarding RTS 28, a noteworthy deficiency was the provision of insufficient data regarding the quality of the execution which led to the prevention of assessment and comparison between the different firms.  ESMA proposed some changes to RTS 28, including the publication of reports in a standardised CSV format, the clarification of data relevant to different business models and increased transparency on payments for order flow.  

5. 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. 

Being compliant is always more cost-effective than being non-compliant. A strong best execution framework not only ensures adherence to regulatory standards but also strengthens client confidence and the firm’s reputation in the market. 

Final Thoughts

As financial markets continue to grow in complexity, robust regulatory oversight is essential. MiFID II’s best execution rules provide a strong foundation for investor protection requiring firms to adapt to evolving standards. By implementing effective compliance functions, responding to CySEC’s directives, and preparing for enhance RTS reporting, investment firms can build trust and deliver superior outcomes for their clients. 

In collaboration with the Institute for Professional Excellence (IforPE), SALVUS offers a self-study CPD course titled “Master Best Execution Requirements in 2025.” Specifically designed for professionals in the financial industry, this course provides an essential overview of the key requirements for achieving the best execution standards.  

For support with your best execution obligations, contact us at  compliance@salvusfunds.com or explore our Master Best Execution Requirements in 2025 course for a comprehensive guide in achieving best execution compliance.    

#StayAhead

Should you be interested to read about other SALVUS related authored articles, please visit the selected articles below: 

• Are you complying with the Best Execution obligations? 
• Reviewing the Key Information Documents (KIDs) 
• Are you ready for a Best Execution inspection? 
• The Best Execution Responsibilities of Investment FIRMS 
• Client Categorization and Investor Protection under MiFID II  

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