- within Finance and Banking topic(s)
- in United Kingdom
- within Employment and HR, Insolvency/Bankruptcy/Re-Structuring and Corporate/Commercial Law topic(s)
QuickTake
Germany’s transitional exemption from the EU-wide ban on Payment for Order Flow (PFOF) under Arti-cle 39a(1) of Regulation (EU) 600/2014 (MiFIR) expired on 1 July 2026. Since that date, Germany-based investment firms may no longer accept third-party payments for forwarding client orders to exe-cution venues.
On 22 July 2026, Bafin followed up with Aufsichtsmitteilung 05/2026 (WA)1, an unusually concrete su-pervisory notice (valid until 30 June 2029) setting out its expectations for the transition to PFOF-free business models.
Bafin explicitly names three circumvention structures it considers impermissible and adopts a consistent economic-substance-over-form approach: relabelling a payment stream does not remove it from the scope of Article 39a(1) MiFIR.
This Client Alert summarises the notice’s key content and identifies action items for affected firms and should also be read in our earlier Client Alert (20 May 2025) on the European Securities and Markest Authority’s rules on investment order execution policies and PFOF.2
Beyond these headline points, the alert addresses four issues of particular commercial and supervisory significance:
- Bafin’s intervention is unusually detailed compared with other NCAs — the notice names spe-cific impermissible structures and applies an economic-substance test that goes beyond the bare text of Article 39a(1) MiFIR, potentially setting a template for supervisory convergence across the EU.
- Origin-of-order look-through in intermediary chains — Bafin requires firms acting as intermedi-ate agents to look through the order chain to the retail or in-scope professional client, meaning PFOF received anywhere along the chain is caught even if the immediate counterparty is a profes-sional firm.
- Vertically integrated groups face fee-justification requirements — intra-group MTF or execu-tion-venue fees must be substantiated against market and cost benchmarks; economic equivalence to PFOF is assessed on consolidated group economics, not legal-entity boundaries.
- Permitted replacement models remain subject to difficult best-execution and conflicts anal-yses — own-account dealing, systematic internalisation and market-making models avoid the PFOF prohibition but do not avoid the full weight of MiFID II best-execution, conflicts-of-interest and single-venue justification requirements.
Read the full article
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]
