Industry experts and lawmakers are weighing in with their thoughts now that the Securities and Exchange Commission has announced its plans to consider a new best-execution rule, Regulation Best Execution, for client trades.
According to the Dec. 14 open meeting notice, the new rule "would establish a best execution standard and require detailed policies and procedures for brokers, dealers, government securities brokers, government securities dealers, and municipal securities dealers and more robust policies and procedures for entities engaging in certain conflicted transactions with retail customers, as well as related review and documentation requirements."
James Angel, associate professor of finance at Georgetown University's McDonough School of Business, told ThinkAdvisor Thursday in an email that the Financial Industry Regulatory Authority "already has a best execution rule (5310), so the question is: What does the SEC rule add? I can't wait to see the details."
Angel said he'd like an update to Rule 606 of Regulation National Market System, which requires broker-dealers to disclose information regarding the handling of their customers' orders in NMS stocks and listed options.
"That would give us better information about the execution quality from our brokers," Angel said. "What I am concerned about is the micromanagement of market microstructure. I'm very concerned that the proposed auctions will be a field day for the flash boys, because auctions are prone to gaming and misfiring."
FINRA Rule 'Wildly Outdated'
Tyler Gellasch, president and CEO of Healthy Markets Association in Washington, added Friday in a phone interview that "By moving a self-regulatory organization rule over to the SEC, you're going to dramatically improve the chances of robust enforcement — but you also need to update the rule."
