Best Execution

What this video covers

• The exact meaning of reasonable diligence: why best execution is not a guarantee of the absolute best price on every trade
• The six factors firms must balance: price improvement opportunities, speed of execution, size of execution, likelihood of execution (especially for limit orders), transaction costs, and customer needs and expectations
• Why a broker-dealer cannot delegate its best execution obligation to another broker-dealer, and how the original firm retains ultimate responsibility
• What regular and rigorous reviews of execution quality means, and why regulators require ongoing proof rather than one-time compliance
• How payment for order flow (PFOF) creates a conflict of interest, and why it does not automatically violate or alter best execution obligations
• The two major exam traps: the "absolute best price" bait versus reasonable diligence, and the "automatic violation" bait versus permitted PFOF with continued duty