XTB Weighs Systematic Internalizer Model for Stock/ETF Execution

XTB, a major retail forex and CFD broker, is examining systematic internalizer (SI) models for executing client orders in stocks and ETFs, according to Filip Kaczmarzyk, its board member for trading. In an interview with Biznes Info, Kaczmarzyk said the broker is seeking lower execution costs while maintaining its zero-commission offer for cash equities and ETFs up to €100,000 monthly turnover. Currently, XTB routes these orders to regulated markets, but as these products become a larger part of its revenue diversification, the company is exploring alternatives.

A systematic internaliser under MiFID II is an investment firm that executes client orders against its own account on an organized, frequent, systematic and substantial basis outside traditional venues. While this can reduce exchange and commission fees, it does not exempt firms from transparency or best-execution obligations. MiFIR requires SIs in shares and ETFs to publish quotes during normal trading hours, use non-discriminatory execution rules, and comply with best-execution requirements. Kaczmarzyk did not specify whether XTB would become an SI itself, partner with an external provider, or adopt a different structure, nor did he provide a timeline.

The consideration comes as European brokers grapple with the economics of zero-commission trading. Trade Republic recently moved to an in-house execution model after Germany's payment-for-order-flow (PFOF) exemption expired, aggregating prices from 30 exchanges before executing against its own account. Clients can choose a specific venue for a €2 fee. Scalable Capital uses a subscription model to fund low-cost trades. These approaches differ from PFOF, which pays a broker for routing orders to third parties; an SI executes internally, but conflicts of interest and execution quality become key watchdogs for regulators.

For retail traders, the shift means potential cost savings, but also raises concerns about execution price fairness and transparency. Regulatory oversight of SI pricing and best execution will be critical. XTB's zero-commission model has been a competitive edge, and any change could affect its fee structure. As of now, XTB says it has no plans to restore standard commissions, but the exploration indicates the model's sustainability is under review.

This is information, not investment advice.