BaFin’s new supervisory statement confirms that, as of 1 July 2026, credit institutions and investment firms in Germany are **prohibited from accepting any monetary or non‑monetary benefits from third parties in return for forwarding client orders** (PFOF), aligning German practice with the EU‑wide ban under revised MiFIR. This is a structural shift for neobroker and low‑fee brokerage business models, with immediate implications for remuneration structures, best‑execution frameworks, conflict‑of‑interest management, and client disclosures.
What Changed
- - Credit institutions and investment firms are no longer permitted to accept payments, fees, commissions or non‑monetary benefits from third parties (e.g.
- The prohibition applies to the forwarding of both retail and professional client orders and covers any form of economic benefit linked to routing orders to a specific counterparty or venue.
- Germany’s previous use of the MiFIR national exemption for domestic clients has ended; there is no longer any national carve‑out for PFOF in relation to clients resident or established in Germany.
- BaFin’s supervisory statement specifies how firms must interpret and apply the EU‑level PFOF ban in practice, including alignment with ESMA’s interpretative decisions on the scope of prohibited...
- The stated regulatory objective is to improve the quality of client order execution and prevent conflicts of interest arising from execution venues or market makers incentivising brokers to route...
Suggested Considerations
- Identify and map all current remuneration streams linked to order routing, including explicit PFOF arrangements, volume‑based rebates, and other benefits from market makers or venues, and cease any arrangements that constitute PFOF or similar third‑party inducements for forwarding orders.
- Review and update MiFID II / MiFIR inducement policies to explicitly classify PFOF and similar execution‑related rebates as prohibited benefits, ensuring no reliance on inducement disclosure or quality‑enhancement arguments to justify them.
- Amend best‑execution policies and procedures to remove any consideration of third‑party payments from venues or market makers in the execution‑venue selection process and to emphasise price, cost, speed, likelihood of execution, and other MiFID II best‑execution factors.
- Conduct a conflicts‑of‑interest assessment to identify any residual incentives or arrangements that could compromise the duty to act in the best interests of clients in order routing, and implement mitigation measures or remove such conflicts where necessary.
- Redesign pricing and revenue models for neobroker and low‑fee brokerage services to replace PFOF‑funded “zero‑commission” offerings with compliant alternatives, such as explicit commissions, spreads, subscription fees, or other transparent charges.
Key Dates
- EU‑level PFOF prohibition under revised MiFIR enters into force, generally banning payment for order flow in the EU, subject to transitional national exemptions
- German national exemption allowing PFOF for orders from in‑country clients to in‑country firms expires; after this date no new orders may rely on the exemption
- Full application of the PFOF ban to German clients and German‑authorised firms; credit institutions and investment firms are prohibited from accepting any third‑party payments or benefits for forwarding client orders, and BaFin’s supervisory statement takes practical effect
- BaFin publishes its supervisory statement specifying rules for neobrokers and other firms on how to comply with the PFOF ban and explaining ESMA’s interpretative decisions and consumer impacts
Compliance Impact
Non‑compliance with the PFOF ban exposes firms to BaFin enforcement action, including fines, supervisory measures, potential restrictions on business activities, and reputational damage, particularly where conflicts of interest and client detriment are identified. Given the structural role of PFOF in many neobroker models, failure to adapt business practices and remuneration structures promptly can also threaten the economic viability of affected firms.