Questions Stemming from FINRA’s Best Execution Guidance

2 December 2015
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Key takeaways

  • On November 20, 2015, FINRA issued Regulatory Notice 15-46 providing guidance on broker-dealer best execution obligations for equity, options and fixed income trading (the “Notice”).
  • The Notice breaks new ground on two best execution issues. First, it suggests that broker-dealers are required to conduct order-by-order reviews of execution quality in certain situations, including for large-sized trades and trades executed internally. Second, the Notice encourages broker-dealers to consider whether electronic platforms for fixed income trading may improve execution quality and should be incorporated into the broker-dealer’s routing decisions.
  • FINRA’s stated rationale underlying these new principles is the rise of electronic trading and recent advances in trading technology and communications systems. Best execution committees should consider whether their current practices are in line with those outlined in the Notice.