The regulation governing how your broker must treat your orders in Europe has a name: MiFID. Most traders have never read it, but it affects them every time they click “buy” or “sell”. Understanding what it actually requires gives you an objective checklist for judging any broker, beyond whatever its marketing says.
What “best execution” means under MiFID
The Markets in Financial Instruments Directive (MiFID II) requires European brokers to take “all sufficient steps” to obtain the best possible result for their clients when executing orders. This isn’t a recommendation — it’s a legal obligation, with concrete criteria: price, cost, speed, likelihood of execution and settlement, size and nature of the order.
Best execution is a multi-factor concept. A broker can justify a slightly worse price if, say, it guarantees much faster or more reliable execution for that specific type of order. What MiFID requires is a reasoned process, not a single number.
What MiFID requires brokers to publish
- A best execution policy, accessible to the client
- Periodic reports on the main execution venues used
- Information on the quality of execution obtained at those venues
This is exactly the kind of document you can ask your broker for — and one that, in practice, very few users ever look at.
Where Smart Routing fits in
Smart Routing at brokers like Interactive Brokers is, in practice, the technical mechanism that fulfills this obligation: instead of manually deciding where to send each order, an automated system competes in real time across dozens of execution venues to maximize the outcome the rule requires.
The 2026 PFOF ban
The MiFID II review includes banning Payment for Order Flow starting in 2026 across the entire European Union — a decision that closes a channel which, according to regulators, created a structural conflict of interest with the best execution obligation itself. You can read in detail how that conflict works in our article on Payment for Order Flow.
The gray area ESMA wants to close
Some retail execution venues have so far operated in an ambiguous zone regarding their classification as a multilateral system under MiFID. ESMA has announced it will clarify this framework, which will likely require more transparency about how and where retail clients’ orders are actually executed.
How to check it yourself
Best execution checklist
Does your broker publish its best execution policy?
Does it publish execution quality reports by venue used?
Does it accept Payment for Order Flow?
How many execution venues does its routing system access?
If you trade with ProRealTime on top of Interactive Brokers, this checklist is already resolved in your favor from the start.
Conclusion
MiFID isn’t fine print with no practical effect: it’s the rule that requires your broker to seek, on objective criteria, the best possible outcome for your orders. Knowing its minimum requirements — a published policy, quality reports, no Payment for Order Flow — gives you an objective way to compare brokers that goes well beyond just looking at the advertised commission.
