BD Best Execution

Overview

Broker-dealers have an obligation to obtain "best execution" for their clients. There is a substantial body of regulatory guidance on the concept of best execution; i.e., that while "best price" is the most important factor, it is not the only consideration. The regulators have identified other aspects of a broker’s order execution-actors decision that are relevant to best execution, including the following: speed of execution, size, availability of information, trading characteristics of the security, transaction costs, ease of getting a fill, price improvement opportunities, and the likelihood of execution of limit orders. See also the topic page on Front Running and Trading Ahead.

The concept of "best execution" is also very closely related to the limitation on a broker-dealer's markups. That is, (i) a broker-dealer must attempt to execute a transaction in the best possible manner for the client and (ii) the amount of profit that the broker-dealer takes in its purchase from, or sale to, the customer must be reasonable. See the topic page on Mark-Ups.

Steven.Lofchie@cwt.com's picture
Contributor Organization 
Contributor Title 
Partner
mark.highman@cwt.com's picture
Contributor Organization 
Contributor Title 
Senior Attorney
maurine.bartlett@cwt.com's picture
Contributor Organization 
Contributor Title 
Senior Counsel

Find

 
Find: 

SRO Rules

Developments

Regulatory Assistance

Enforcement

 

Know

 
Know: 

Broker-Dealer Guide