EU · MiFID II · TITLE II AUTHORISATION AND OPERATING CONDITIONS FOR INVESTMENT FIRMS · CHAPTER II Operating conditions for investment firms · Section 2 Provisions to ensure investor protection
Article 27 MiFID IIObligation to execute orders on terms most favourable to the client
Best execution: firms must take all sufficient steps to obtain the best possible result for clients, judged for retail clients on total consideration (price plus execution costs), and follow specific client instructions. Firms must have an order execution policy that clients consent to (with express consent for execution outside a trading venue), tell clients where orders in instruments subject to the trading obligations were executed, and monitor and review their arrangements; the former venue and top-five reporting requirements have been removed.
Amendments and application dates
| Amending act | Change | Applies from |
|---|---|---|
| Directive (EU) 2024/790 | Text deleted; Text amended | 29 Sept 2025 |
Level 2: delegated and implementing acts
- RTSIn force; applies (in whole or in part) from 12 Feb 2028Legal basis
AI summaryRTS on best execution under the amended Article 27 MiFID II: sets the content of order execution policies, criteria for selecting execution venues and routing orders (including automatic order routing and single-venue policies), client instructions, dealing on own account, use of reference data such as the consolidated tape, and monitoring and periodic assessment of policy effectiveness. Repeals RTS 27 and RTS 28 (2017/575 and 2017/576); applies from 12 February 2028.
- Delegated actIn forceLegal basis
AI summaryCorrects cross-reference errors in Delegated Regulation 2017/565, in Article 1(1) (which should refer to Article 64(4), Article 65 and Chapter VIII) and in several entries of Annex I on record keeping.
- Delegated actIn forceLegal basis
AI summaryThe main MiFID II Delegated Regulation: defines key terms (such as investment advice, systematic internaliser, algorithmic and high-frequency trading, and direct electronic access) and sets detailed organisational requirements and operating conditions for investment firms, including compliance, conflicts of interest, remuneration, client information, suitability and appropriateness, best execution, client order handling, reporting to clients, record keeping and transaction-level obligations.
- RTSEnds 11 Aug 2028Legal basis
AI summaryRTS 27 on the quarterly data execution venues had to publish on execution quality (price, costs, likelihood of execution and other details by instrument and order size) to support best execution. The underlying publication duty was suspended in 2021 and later removed; the RTS is repealed by Delegated Regulation 2026/825 and remains valid until 11 August 2028.
- RTSEnds 11 Aug 2028Legal basis
AI summaryRTS 28 requiring investment firms to publish annually, for each class of financial instruments, their top five execution venues by trading volume for client orders, with a summary of the execution quality obtained. Repealed by Delegated Regulation 2026/825; valid until 11 August 2028.
Level 3: ESMA Q&As, guidelines and opinions
- Q&AAnsweredESMA rulebook
AI summaryTied agents are relevant persons, so the requirement in Article 27(4) of the MiFID II Delegated Regulation to balance fixed and variable remuneration applies to them, though Recital 41 allows a larger variable share given their special status; Member States using the Article 3 exemption must apply at least analogous remuneration rules.
- Q&ARejectedInferred · 75%
AI summaryAsked how firms should classify non-EU instruments that are absent from FIRDS and FITRS when preparing RTS 28 best-execution reports. ESMA rejected the question, so there is no answer.
- Q&AAnsweredInferred · 85%
AI summaryRTS 27 and RTS 28 reports must be free, machine-readable (for example CSV or XML) and published in an easily found place on the website with no firewall, registration or password; RTS 28 reports should also be readable by retail clients or come with an alternative visualisation.
- Q&AAnsweredInferred · 75%
AI summaryFor RTS 27 reporting of instruments traded on an EU venue for which ESMA publishes no SMS, LIS or SSTI values (including non-EU instruments), venues should use the smallest standard market size for the instrument type and the LIS thresholds of the lowest liquidity band in RTS 1, and the transparency Q&A approach for bonds.
- Q&AAnsweredInferred · 80%
AI summaryA venue running continuous trading (continuous order book or quote-driven) should describe its trading system in RTS 27 reports, state that continuous trading was conducted and enter 'N/A' in the trading mode column.
- Q&AAnsweredInferred · 80%
AI summaryBecause quote-driven systems have no order book, firms executing client orders through them should enter 'N/A' in the passive and aggressive order fields of their RTS 28 reports.
- Q&AAnsweredInferred · 80%
AI summaryRTS 28 reporting of orders executed on third-country venues covers all such venues, whether or not the Commission has found their market equivalent.
- Q&AAnsweredInferred · 80%
AI summaryExecution venues and firms should enter 'N/A' in any RTS 27 or RTS 28 template field that does not apply to their activities, for example scheduled auctions at a venue that holds none.
- Q&AAnsweredInferred · 80%
AI summaryMarket makers and other liquidity providers must include in RTS 27 reports their transactions in instruments not subject to the trading obligation, whether OTC or under MiFIR pre-trade waivers; waived trades concluded on a venue are reported by both the liquidity provider and the venue, which identifies them separately.
- Q&AAnsweredInferred · 80%
AI summaryTrades agreed through a venue's non-anonymous RFQ system are executed on that venue, but to make order routing transparent ESMA prefers firms' RTS 28 reports to identify the counterparty they selected and dealt with through the system.
- Q&AAnsweredInferred · 80%
AI summaryAn 'other liquidity provider' under RTS 27 is a firm that regularly and consistently provides liquidity in an instrument as part of its business, on or off venue, without needing formal agreements or a continuous quoting commitment; a CFD provider quoting two-way prices on own account would qualify, and the classification is made across all of a firm's trades.
- Q&AAnsweredInferred · 80%
AI summaryA firm using a broker's direct electronic access to send orders to a chosen venue should list the DEA provider in its top-five report, treating the order as a specific instruction; the DEA provider includes those trades in its own RTS 28 report as directed orders, unlike a broker that keeps discretion over the venue.
- Q&AAnsweredInferred · 85%
AI summaryRTS 27 venue reporting does not apply to securities financing transactions, which MiFIR exempts from transparency, but the MiFID II best-execution duties still apply to SFTs and firms' RTS 28 reports must cover them.
- Q&AAnsweredInferred · 85%
AI summaryAn investment firm or market operator operating an OTF must cover best execution both at firm level (which venues, including its own OTF, it uses) and at OTF level (how the best result is achieved within the OTF), setting out where and how it exercises discretion.
- Q&AAnsweredInferred · 85%
AI summaryPortfolio managers and receivers and transmitters of orders that send orders to a broker generally need not report the passive/aggressive split in their RTS 28-style report under Article 65(6) of the Delegated Regulation, unless they gave a specific passive or aggressive instruction; when they execute directly on a venue, the split must be reported.
- Q&AAnsweredInferred · 80%
AI summaryFor the start of MiFID II, ESMA expected venues' first RTS 27 report, covering a period representative of Q1 2018, by 30 June 2018, and firms' first annual RTS 28 report by the end of April 2018, accepting that first reports might lack data that depended on new MiFID II/MiFIR provisions.
- Q&AAnsweredInferred · 75%
AI summaryPortfolio managers and receivers and transmitters of orders must list the top five execution entities at the level of each individual firm, not aggregated to the group parent; where group entities dominate the list, ESMA suggests adding information on other third-party brokers regularly used.
- Q&AAnsweredInferred · 90%
AI summaryExecution venues' RTS 27 reports under Article 27(3) MiFID II must cover all transactions on the venue whatever the client category, including eligible counterparty trades, unlike firms' RTS 28 reports, which cover only retail and professional client orders.
- Q&AAnsweredInferred · 80%
AI summaryAn investment firm or market operator running an OTF must cover best execution both at firm level (which venues, including its own OTF, it uses) and at OTF level (how the best result is achieved within the OTF's mechanisms), and set out where and how it exercises discretion.
- Q&AAnsweredInferred · 90%
AI summaryA firm may use a single execution venue for a class of instruments only if it can show this consistently gets the best result for clients, which requires regularly assessing alternative venues, for example using RTS 27 data, and documenting the venue selection factors in its execution policy.
- Q&AAnsweredInferred · 85%
AI summaryUnder Article 5 of RTS 27, execution venues should publish cost information aggregated at the level of the venue and each market segment it operates (for example lit and dark books), differentiated where fees vary by client or member type, so that venues can be compared.
- Q&AAnsweredInferred · 85%
AI summaryESMA expects firms that execute or transmit client orders, and portfolio managers, to publish their annual top-five execution venue reports (RTS 28 and Article 65(6) of the MiFID II Delegated Regulation) by 30 April following the end of the period covered.
- Q&AAnsweredInferred · 80%
AI summaryUnder RTS 28 Article 3(3), firms must give a separate summary of their execution-quality analysis for each class of financial instrument, though information common to several classes (close links, conflicts, payments and rebates from venues) may be given once on a consolidated basis.
- Q&AAnsweredInferred · 85%
AI summaryA firm that both executes client orders and transmits them to other firms must publish two separate top-five reports, one on execution venues and one on brokers, though it may also publish a consolidated report.
- Q&AAnsweredInferred · 85%
AI summaryESMA expects execution venues' RTS 27 reports and firms' RTS 28 reports each to remain publicly and freely available for at least two years.
- Q&AAnsweredInferred · 85%
AI summaryESMA expects execution venues' RTS 27 reports and firms' RTS 28 top-five venue reports each to stay publicly and freely available for at least two years.
- Q&AAnsweredInferred · 95%
AI summaryMiFID II's 'all sufficient steps' best-execution standard sets a higher bar than MiFID I's 'all reasonable steps': firms must ensure their execution arrangements achieve the intended outcomes on an ongoing basis, monitoring execution quality and their policies before and after the event and escalating findings, though not every individual order must get the best result.
- Q&AAnsweredInferred · 90%
AI summaryArticle 64 of the MiFID II Delegated Regulation requires firms executing or dealing in OTC products, including bespoke ones, to check systematically, before execution, that the price offered to the client is fair, using market data and comparable products, with suitable procedures, valuation systems and scrutiny of pricing models.
- Q&ALegacy Q&A documentESMA rulebook
AI summaryCESR's May 2007 Q&As (CESR/07-320) setting out supervisors' common views on the MiFID I best execution requirements, including their scope, execution policies, venue selection and the Commission's responses on scope. A legacy document predating MiFID II.
- Q&ALegacy Q&A documentESMA rulebook
AI summaryESMA's consolidated legacy Q&A document (ESMA35-43-349, final version 15 December 2023) on MiFID II investor protection topics, including best execution, suitability, call recording, inducements and research, costs and charges, client categorisation, third-country firms and product governance. It is no longer updated; Q&As from 2024 are in ESMA's Q&A tool.
- Q&ALegacy Q&A documentESMA rulebook
AI summaryESMA's consolidated legacy Q&A document (ESMA70-872942901-38, final version 13 October 2023) on market structure topics, covering data disaggregation, direct electronic access and algorithmic trading, the tick size regime, multilateral and bilateral systems (including OTFs and systematic internalisers) and access to CCPs and trading venues. It is no longer updated; later Q&As are in ESMA's Q&A tool.
Commentary
No law-firm commentary is linked to this provision yet.
393 more documents relate to MiFID II as a whole without naming an article.
UK counterpart
- DivergedExplicit reference · 90%
EU changes after exit: Directive (EU) 2024/790 (from 29 Sept 2025).
- COBS 11.2A.2R Obligation to execute orders on terms most favourable to the client
- COBS 11.2A.9R Role of price
- COBS 11.2A.12R Following specific instructions from a client
- COBS 11.2A.15R Delivering best execution where there are competing execution venues
- COBS 11.2A.19R Delivering best execution where there are competing execution venues
- COBS 11.2A.20R Requirement for order execution arrangements including an order execution policy
- COBS 11.2A.21R Requirement for order execution arrangements including an order execution policy
- COBS 11.2A.22R Requirement for order execution arrangements including an order execution policy
- COBS 11.2A.23R Requirement for order execution arrangements including an order execution policy
- COBS 11.2A.24R Requirement for order execution arrangements including an order execution policy
- COBS 11.2A.32R Execution policies
- COBS 11.2A.37R Providing information to clients on order execution
- COBS 11.2A.31R · Execution policiesDivergedExplicit reference · 90%
EU changes after exit: Directive (EU) 2024/790 (from 29 Sept 2025). UK changes after exit to COBS 11.2A.31R: FCA 2021/59 (from 1 Dec 2021).
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Version history
- From 28 Mar 2024
- From 28 Feb 2022 to 28 Mar 2024
- From 17 Sept 2014 to 28 Feb 2022
Each entry is a consolidated version of the act on EUR-Lex in which this provision appears. The text itself is on the official site.