FINRA Shows Subtle Shift On Evaluating Best Execution

Law360 (July 19, 2021, 1:27 PM EDT) -- On June 23, the Financial Industry Regulatory Authority issued Regulatory Notice 21-23 on best execution and payment order flow.

Most of the material in the notice reminds member firms of existing rules and guidance found in prior FINRA notices and U.S. Securities and Exchange Commission releases about best execution.

There are three new concepts, however, that merit discussion: (1) a new position that payment for order flow, or PFOF, arrangements may not be taken into account in analyzing market quality, contradicting existing guidance; (2) a prohibition on PFOF contractual arrangements that may reduce price improvement opportunities; and (3) a warning that...

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