Best Execution Obligations

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Chapters in this video

  1. 0:00 The non-delegable duty: Riley and Carla
  2. 1:52 Why price is not everything: the flight analogy
  3. 3:19 Sam the supervisor and the quarterly review rule
  4. 5:27 Interpositioning and the third-party middleman trap
  5. 6:27 Rapid-fire exam recap

What this video covers

  • Why best execution applies equally to agent and principal transactions, and why the duty is non-delegable
  • How best execution weighs price against speed of execution, likelihood of execution, and total transaction cost (not price alone)
  • The minimum quarterly frequency for regular and rigorous reviews when a firm skips order-by-order checks
  • Why reviews must be conducted on a security-by-security, type-of-order basis (e.g., market orders separate from limit orders)
  • Why payment for order flow (PFOF) is permitted but triggers heightened scrutiny to prove routing decisions still deliver best execution
  • What interpositioning is: inserting a third party between the firm and the best market
  • When interpositioning is acceptable (better price for the customer) versus when it is a violation (added cost with no customer benefit)

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