Best Execution

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Brokers have a fiduciary duty to achieve best execution for their clients when executing orders. All too often, brokers have hidden behind technology and complexity to get “good enough” execution, rather than best execution. All too often, brokers have routed orders for their own financial interests without disclosing it to their clients, rather than to maximize execution quality for their clients. Payment for order flow and exchange rebates create an intractable conflict of interest, and while disclosure is a step forward, the only solution is to dramatically reform order routing inducements and the brokers’ responsibility of best execution. This can be done by ending inducements, or passing them through to the investor, and by adopting an order-by-order standard for evaluating trade outcomes. Once again, technology has moved ahead of regulation, and it is time to catch up.

key issues

  • End Payment For Order Flow: Brokers face an intractable conflict-of-interest when their profitability is pitted against customer execution quality, and weak best execution regulation and enforcement. Order routing inducements must end or be disclosed and passed on to the end investor, including exchange rebates and payment for order flow.
  • Order-by-order standard: Brokers that execute customers’ orders should be required to obtain best execution for each order, based on market conditions existing when they receive each order, rather than based on an average of prices for multiple customer orders.

opportunities for advocacy

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FINRA calls the rule protecting your price “time-tested.”

Ten years of enforcing Rule 5310 produced ten paperwork cases and not one dollar returned to a single customer. Now FINRA is asking whether to relax it. Comments are due September 25, 2026, and it takes about two minutes.

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