Mar. 22, 2023
As an individual investor, I understand the complexities involved in choosing how to execute a trade, which is why best execution is crucial in trade execution. It is important to provide clear guidance on how to read and interpret the data in Regulation NMS Rule 605 reports, especially for retail investors who may not have a deep understanding of the markets. Brokers have a duty of Best Execution derived from common law agency principles and fiduciary obligations. However, it needs to become a rule that the SEC can enforce to protect the interests of individual investors. Conflicted orders don't belong in a Best Execution rule. Without the best execution rule, customers may not be aware of revenue arrangements between brokers and subpar trading firms or that they may be paying higher transaction prices. Different trading venues may offer different prices, slower execution can lead to missed opportunities, and less reliable settlement processes can delay receipt of proceeds. The SEC has charged Robinhood for failure to satisfy its best execution obligation, resulting in an aggregate loss of $34.1 million for its customers. Robinhood made misleading statements and did not disclose payments received for routing trades to specific firms. Similarly, Citadel paid the SEC $22.6 million in 2017 to settle best execution charges for executing customer trades at less favourable pricing when a better price was available. The proposed Regulation Best Execution is a necessary step in protecting household investors and promoting fair and efficient markets by ensuring that household investors are receiving the best possible execution for their trades. - Beto Satoyo