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In the stock market, how does one measure execution quality? Further, what might that have to do with the movie “The Matrix”?

Every day, investors like you turn to broker-dealers in the markets—often through brokerage apps—to build a better financial future.

When you decide to buy five or sell five or 10 or more shares of stock, you usually place what’s called a “market order.” It’s convenient.

But how do you know if the broker that executed your market order got you the best execution? Well, there are measures that compare the price you received with what’s called the “National Best Bid and Offer” at a particular time. That’s one way to evaluate your execution quality.

Execution quality, in essence, can measure where within a particular time within the so-called “bid-ask spread” your broker executes your order. For instance, if you get middle of the market—midpoint—that’s pretty good; that’s halfway into the market.

And this is measurable—but currently, the brokerage apps you’re using are not required to disclose to you this information in that way.

And that’s why, this past December, we at the Securities and Exchange Commission made a proposal about order execution quality disclosure reports, updating something that had not been updated in 22 years. That’s time enough to grow up, get a license, get a job, get out of college. Time enough for us to update this rule.

First, we proposed that broker-dealers—like those brokerage apps you’re using—disclose execution quality to you, their customers.

Right now, only the so-called market centers, including the wholesalers in the dark markets, must make this disclosure. By requiring introducing brokers—those brokerage apps—to disclose execution quality as well, investors like you would receive a more complete picture of execution quality, and you’d be able to compare the brokerage apps when you select them.

Second, we’re proposing to require more types of data to go into these execution quality reports.

You see, institutional investors, for example, get to see price improvement as a percentage of the so-called bid-ask spread. I think everyday investors would also benefit from easy access to these same metrics.

Third, now let’s get to the movie “The Matrix.”

You see, the rule that was put into place 22 years ago—requiring those market centers to disclose one aspect of execution called price improvement—we proposed to improve on that. But further, currently, these reports look like a series of dashes and numbers. I kid you not: it’s kind of like the opening credits in “The Matrix.”

Unless you’re Keanu Reeves, how are you really going to figure that out?

Instead, this proposal would help “welcome” execution quality reports “to the real world” – where you, the investor, can actually use them.

That would help investors like you compare brokers and pick one worthy of your business.

We can do that only with your help, so please weigh in and comment on our proposal.