Draft Delegated Regulation Specifying the Criteria for Establishing and Assessing the Effectiveness of Investment Firms’ Order Execution Policies

Why It Matters

The regulation strengthens investor protection and establishes a single EU‑wide standard for execution quality, forcing firms to upgrade compliance processes and leveling competition.

Key Takeaways

• Draft replaces 2017 Delegated Regulations 575 and 576.
• Sets EU-wide criteria for selecting execution venues.
• Requires detailed data collection for monitoring execution policies.
• Mandates periodic effectiveness assessments of order execution.
• Defines homogeneous instrument classes for quality measurement.

Pulse Analysis

The European Commission’s April 14, 2026 draft Delegated Regulation marks the latest step in refining the MiFID II framework, which has governed EU securities markets for over a decade. By delegating technical standards to the European Securities and Markets Authority, the Commission seeks to embed a consistent methodology for evaluating order execution quality across all investment firms. The new RTS replace the outdated 2017 Delegated Regulations 575 and 576, reflecting lessons learned from post‑trade transparency initiatives and the rapid growth of algorithmic trading. This regulatory refresh aims to close gaps that previously allowed divergent execution practices.

The draft outlines six core requirements. First, firms must adopt a transparent venue‑selection process that demonstrably delivers the best possible result for client orders. Second, they are obliged to collect granular execution data—timestamp, price, size, and venue—to feed continuous monitoring dashboards. Third, routing rules must prevent adverse market impact, while fourth, client‑specific instructions receive explicit safeguards to preserve investor protection. Fifth, firms must conduct periodic effectiveness reviews, benchmarking performance against defined homogeneous instrument classes. Together, these provisions raise the bar for data integrity and operational discipline.

For the industry, the regulation translates into higher compliance costs but also creates a level playing field, as all firms will be measured against the same quantitative criteria. Asset managers and broker‑dealers can leverage the standardized metrics to differentiate themselves through superior execution analytics, potentially attracting cost‑conscious institutional investors. Regulators, meanwhile, gain a clearer supervisory toolkit to detect execution shortfalls and enforce remedial actions. As EU markets continue to integrate with global trading venues, the new RTS are likely to become a reference point for other jurisdictions seeking harmonized execution standards.