ESMA_QA_2559
Status: ✅ Answer Published
Link to ESMA Q&A tool: https://www.esma.europa.eu/publications-data/questions-answers/2559
Regulatory Context
Regulation : MIFIR
Level 1 Regulation: Markets in Financial Instruments Regulation (MiFIR) Regulation (EU) No 600/2014 - Investor Protection and Intermediaries
Level 2 Regulation: No information available
Level 3 Regulation: No information available
Topic: Inducements
Subject Matter: Payment for order flow (PFOF) prohibition and OTC execution of client orders
Question
Submission Date: 03 June 2025
Does the prohibition of receiving payment for order flow (PFOF) apply to situations where the order is not executed on a trading venue, for instance for products traded over the counter (OTC)?
ESMA Answer
Answer Date: 03-03-2026
Answer provided by the European Commission The scope of application of Article 39a of MiFIR should be considered taking into account the core policy objectives of MiFIR, including:(a) investor protection;(b) execution of orders in the best interest of clients.Since those objectives support the broadest possible coverage of execution venues, the prohibition should be understood as applying not only to transactions executed on a trading venue, but also to transactions executed over the counter (OTC). That interpretation would also be consistent with the definition of an “execution venue” set out in Article 64(1), second subparagraph, of Commission Delegated Regulation (EU) 2017/565.1
(1) Execution venue’ includes a regulated market, an MTF, an OTF, a systematic internaliser, or a market maker or other liquidity provider or an entity that performs a similar function in a third country to the functions performed by any of the foregoing.” (Article 64(1) Commission Delegated Regulation (EU) 2017/565). Disclaimer: The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.
This document was automatically extracted from the ESMA EMIR Q&A database.