Regulation NMS and Best Execution

What this video covers

• Why a broker-dealer routing customer orders serves two masters: FINRA's best execution rule and Regulation NMS from the Securities and Exchange Commission (SEC)
• How the regular and rigorous review works as a fallback when a firm does not review every order individually, including the quarterly frequency and security-by-security, order-type-by-order-type granularity
• What interpositioning is and why inserting a third party requires demonstrable, quantifiable benefit to the customer, not merely plausible benefit
• The difference between the monthly execution quality reports filed by market centers and the quarterly order routing reports filed by broker-dealers, including payment for order flow (PFOF) disclosures
• Why the Order Protection Rule, also known as the Trade Through Rule, protects only automated, top-of-book quotations and never manual quotes or depth-of-book quotes
• What locked and crossed quotations are, and why the market maker who caused the condition must promptly remove the offending quote
• How the subpenny rule applies a one-penny ($0.01) minimum increment for National Market System (NMS) stocks priced at $1.00 or above, with subpenny pricing permitted only below the $1.00 stock price threshold