NASD expands broker-dealer's duty of best execution

• Published in: The journal of investment compliance Vol. 8; no. 1; pp. 25 - 28
• Main Authors: Yim, Soo J, Farris Öberg, Christie
• Format: Journal Article
• Language: English
• Published: Bingley Emerald Group Publishing Limited 01.04.2007; Emerald Group Publishing, Ltd
• Subjects: Bond markets; Compliance; Evaluation; Financial institutions; Financial management; Financial markets; Laws, regulations and rules; Management; Securities industry; Securities markets; Stock brokers; Studies; United States; United States > US; Financial management; Financial institutions
• ISSN: 1528-5812; 1758-7476
• DOI: 10.1108/15285810710739337

Purpose - This paper seeks to explain amendments to NASD Rule 2320(a), commonly known as the "best execution rule", approved by the Securities and Exchange Commission on August 21, 2006.Design methodology approach - Explains the scope of the best execution obligation, as amended; outlines factors relevant to a best execution determination; and suggests questions broker-dealers should consider as they review their best execution policies and procedures in light of the amendments.Findings - Most significantly, the amendments make the rule applicable to "any transaction for or with a customer or a customer of another broker-dealer", thus imposing the duty of best execution on a member that executes a customer order received from another broker-dealer. The NASD also has reiterated that debt transactions are subject to the rule. In addition, the rule amendments update certain language and add new Interpretive Material regarding certain aspects of the rule.Originality value - A useful interpretation of recent amendments to the best execution rule.