MSRB and FINRA Provide Guidance for Best Execution in Securities Transactions

FINRA issued a notice to reiterate the best execution obligations that apply when firms receive, handle, route or execute customer orders in equities, options and fixed income securities. In a separate notice, the MSRB issued implementation guidance to assist municipal securities dealers in complying with the MSRB best execution rule that comes into effect March 21, 2016.

In FINRA Regulatory Notice 15-46, FINRA provides guidance on how a firm may satisfy its best execution obligations, including: (i) when regular and rigorous review of execution quality as opposed to order-by-order review is sufficient to discharge a firm's best execution obligations, (ii) how a firm's best execution obligations apply with respect to issues such as payment for order flow and orders from customers that are directed to specific markets for execution, and (iii) the additional issues that firms must address with respect to best execution obligations for fixed income securities.

MSRB's implementation guidance concerning Rule G-18 (Best Execution) (i) addresses how best execution concepts, including the standard of reasonable diligence, apply to municipal securities transactions, and (ii) explains the exemption from the new obligation for transactions with sophisticated municipal market professionals.



MSRB Rule G-18, approved by the SEC in December 2014, requires dealers in municipal securities to seek the most favorable terms reasonably available for their retail customers' transactions.