My Parry set-up, which has worked very well in my group:
Parry
Parry is a combat maneuver you can use if you are fighting defensively or using the total defense action. You must be wielding a melee weapon to parry an attack. Whenever someone strikes you in melee but before damage is rolled, you can choose to make an attack of opportunity using your CMB, and if the result is higher than the attack roll that hit you, negate the attack. Using parry does not allow you to make more than one attack of opportunity in a round, and you can parry as long as you have available attacks of opportunity to use.
Feats
Improved Parry (Combat)
Prerequisites: Combat Reflexes, Parry, Dex 13
Benefit: You gain a +2 when parrying and against parrying. You may now make one parry attempt for each attack of opportunity you have available. Each parry consumes one of your attacks of opportunity for the round, and each subsequent parry receives a cumulative -5 to your roll.
Riposte (Combat)
Prerequisites: Combat Reflexes, Combat Expertise, Parry, Dex 15
Benefit: After successfully parrying an attack, you may make an immediate attack of opportunity against your foe. This consumes one of your attacks of opportunity for the round. This can only be used once per round, regardless of how many attacks of opportunity you are entitled to. This attack may not be parried.
Deflect Projectile (Combat)
Prerequisites: Combat Reflexes, Improved Parry, Dex 15
Benefit: You may now parry ranged attacks. They must be direct attack, you may not parry splash weapons or any ranged attack that is magical (such as rays), or area attacks.
Redirect Projectile (Combat)
Prerequisites: Combat Reflexes, Combat Expertise, Deflect Arrows, Dex 17
Benefit: After successfully deflecting a ranged attack, you may redirect the attack against an adjacent foe. You use the same attack roll as the one you deflected against the target’s AC. The damage is equal to the damage the attack would have done to you. This consumes one of your attacks of opportunity for the round. This can only be used once per round, regardless of how many attacks of opportunity you are entitled to. This attack may not be parried.