FINRA Urges Order-by-Order Review for ‘Best Execution'

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Nov. 24 — In light of recent advances in trading technology and communications, the Financial Industry Regulatory Authority Nov. 20 released guidance urging broker-dealers to conduct order-by-order reviews to satisfy their “best execution” obligations to their customers.

Order-by-order review of execution quality is increasingly possible, FINRA said, and firms that choose not to conduct such a review for some orders must ensure that they rigorously review execution quality for those orders at least quarterly, it said. Some firms, FINRA said, have determined that it's necessary to conduct their reviews more frequently, with most of those firms conducting monthly reviews.

The guidance, Regulatory Notice 15-46, reminds firms of their duty to regularly and rigorously examine execution quality when brokers execute customer orders in equities, options and fixed-income securities. It also suggests factors that firms should consider when conducting their reviews, such as the price obtained, the size of execution, the transaction costs involved and customer needs and expectations.

The Municipal Securities Rulemaking Board coordinated with FINRA and issued similar guidance on the topic (225 SLD, 11/23/15).

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To see the text of the MSRB's guidance, visit:


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