Regulation (EU) 2026/825: new best execution rules for order execution policies from 2028

Commission Delegated Regulation (EU) 2026/825 of 14 April 2026 was published in the Official Journal on 23 July 2026. It supplements MiFID II (Directive 2014/65/EU) under the fourth subparagraph of Article 27(10), as replaced by Directive (EU) 2024/790, which amended MiFID II alongside the 2024 MiFIR review. That provision asked ESMA to draft standards on the criteria for establishing and assessing the effectiveness of order execution policies under Article 27(5) and (7), taking into account whether orders are executed for retail or professional clients. ESMA published its final draft on 10 April 2025 (ESMA35-335435667-6253), and the Regulation is based on it.

The Regulation entered into force on 12 August 2026, the twentieth day after publication, but applies only from 12 February 2028. The Commission explains the gap: firms need time to adjust their order execution policy, their procedures and their IT systems. From the same date it repeals Delegated Regulations (EU) 2017/575 and (EU) 2017/576, known as RTS 27 and RTS 28, on execution venues' data on execution quality and firms' annual reports on their top five execution venues. Directive (EU) 2024/790 had already removed those publication duties from MiFID II, with transposition due by 29 September 2025; our study note on best execution explains how this appears in Cyprus law.

The policy must set out the firm's internal governance procedures for selecting execution venues and the measures that ensure each venue is authorised by the competent authorities or, for a venue in a third country, by the authorities there. Firms must also keep an internal list of the venues they have selected, showing for each one its name and identifier, the date of approval, the person or governance body that approved it and their function, the classes of instruments and types of transaction (including securities financing transactions) for which it may be used, whether it may be used for retail clients, professional clients or both, and any other limits on its use.

For orders executed over the counter, including bespoke products, the policy must describe the arrangements and valuation systems used for systematic and robust checks that the price is fair, with a list of the data providers used. A firm that offers both execution of orders and reception and transmission of orders must explain how it acts in its clients' best interests when deciding whether or not to execute an order.

When selecting venues, firms must consider their clients' characteristics and needs and the best execution factors in Article 27(1) of MiFID II, in particular the order types available, their clients' typical order sizes and frequencies, a comparison of venues' execution prices with reference data, and the costs charged to the firm: trading fees, membership and connectivity costs, and clearing, settlement and custody costs. Reference data must give a complete and accurate picture of execution prices in the market for each class, include at least the most liquid venues and, for instruments traded over the counter, allow a check that the client's price is fair; data from consolidated tape providers may be used where available. A firm that uses only one venue for a class of instruments, or for all client orders, must justify that choice in its policy.

Where an order could be executed on two or more listed venues, the policy must set out the routing criteria and their relative importance: the class of instrument, whether the client is retail or professional, all costs directly related to execution (including the firm's own fees and commissions), the size and nature of the order, and market data, including historical data, where relevant and available. For retail clients, only criteria that directly affect the total consideration count. Firms that use automatic order routing must describe the system's main characteristics and how it applies these criteria.

The policy must warn that specific client instructions may prevent the firm from applying its venue selection rules or from obtaining the best possible result, and must explain how orders with and without specific instructions are told apart. Only the part or aspect of an order covered by an instruction is treated as instructed; everything else follows the policy. Firms that let retail clients choose the venue must explain how the policy avoids inducing a particular choice, how they handle commissions that differ by venue, that clients are free not to choose (the firm then remains responsible for best execution), and that orders without a chosen venue are routed under the policy.

This part is relevant to CIFs that execute client orders by dealing on own account, for example as the counterparty to clients' CFD trades. The Regulation uses the definition of execution venue in Article 64(1) of Delegated Regulation (EU) 2017/565, which includes market makers and other liquidity providers. Where the policy allows execution against the firm's own account, it must explain how the firm obtains the best possible result for clients, the measures that identify, prevent and manage the related conflicts of interest, how the firm assesses the risks for clients, the steps it takes to comply with the client order handling rules in Articles 67 to 70 of Delegated Regulation (EU) 2017/565 and, for OTC products, how it ensures that the price is fair.

The fairness check starts from the instrument's market price at the time of the transaction. If no reliable price is available, the firm uses the market price of similar, comparable or underlying instruments; only if those are not reliable either may it use an internal pricing model based on reliable and accurate data that reflect market conditions.

A firm that executes all client orders, or all orders in a class, on one venue must also assess periodically whether that still gives clients the best possible result on a consistent basis, comparing it with the available alternative venues. Contracts for differences form a separate class in the Annex, so their execution quality is monitored and assessed as a class of their own, apart from other derivatives.

Firms must monitor whether client orders are executed in line with the policy, the quality obtained and the execution price against the reference data, including consolidated tape data where the firm uses it. For each class of instruments, using a representative sample, they must check whether execution quality is consistent against thresholds they set in advance: the accepted deviation of execution prices from the reference data, and the minimum share of traded volume and the minimum number of executed orders that meet the reference values. The other best execution factors in Article 27(1) of MiFID II are monitored too.

The effectiveness of the policy must be assessed at least once a year, and also whenever monitoring shows that the firm is not following its policy or the best execution rules, or a material change affects its ability to keep obtaining the best possible result. The assessment covers the costs charged to the firm, the monitoring results, market developments such as liquidity dry-ups, new venues (their functionality, fees, price transparency and liquidity) and selected venues that disappear, for example through mergers or bankruptcy. Deficiencies must be corrected as soon as possible within a reasonable period, depending on how serious they are. Instruments are grouped into the ten classes in the Annex, with subclasses where a significant number of orders in a class are executed by different methods or where a class is too broad for effective monitoring.

Until 12 February 2028 the current rules continue to apply: Article 27 of MiFID II and Articles 64 to 70 of Delegated Regulation (EU) 2017/565, including the annual review of the execution policy. The 18 months are best used for a gap analysis: who approves venues and how that is recorded, which reference data and data providers to use, which thresholds to set for each class, how prices are checked when dealing on own account, how specific instructions are defined, and what IT is needed to produce the monitoring.