On September 8, the Securities and Exchange Commission approved a Financial Industry Regulatory Authority proposed rule change to National Association of Securities Dealers Rule 2320, which governs members’ best execution and interpositioning obligations. Under Rule 2320(a)’s best execution standards, when executing customer transactions, a member must use reasonable diligence to ascertain the best market for the subject security so the resulting price to the customer is as favorable as possible under prevailing market conditions. With the rule change, Rule 2320(a)’s best execution standards will apply to the interpositioning of a third party between the member and the best available market for a security, which is governed by Rule 2320(b). The Release reminds members that customer cost will remain a crucial factor in determining whether a member has fulfilled its best execution obligations under Rule 2320, including transactions involving interposed third parties.
Click here to read SEC Release No. 34-60635.