The Financial Industry Regulatory Authority is seeking comment on changes to its best execution guidance under Rule 5310 in light of significant market structure developments.
Regulatory Notice 26-15 states that as part of the FINRA Forward rule modernization initiative, the authority is reviewing its guidance to ensure that Rule 5310 remains durable and effective in an evolving marketplace.
FINRA Rule 5310 requires members to use reasonable diligence to ascertain the best market for their customers’ orders so that the price to the customer is as favorable as possible under prevailing market conditions.
FINRA’s notice responds in part to the SEC’s proposed changes to Rule 611 of Regulation NMS, which seeks to remove the ‘trade-through rule’ which requires brokers and exchanges to route an order to the venue displaying the best quoted price.
The SEC said Rule 611 “is not needed as a backstop to best execution given today’s highly automated, interconnected and competitive equity markets, where retail investors have widely available access to market data and execution quality information, and a broker’s duty to provide best execution would apply regardless.”
The SEC also proposed to rescind Rule 610(e) of Regulation NMS, which contains restrictions on locking and crossing quotations in national market system stocks.
In light of the SEC’s proposals, as well as changes in market structure in recent years, FINR said it is looking for industry input on ways it should update its best execution guidance to ensure Rule 5310 continues to serve its key investor protection and market integrity goals.
Assuming that the trade-through rule and related definitions in Regulation NMS are rescinded as the SEC proposes, FINRA asked for comment on changes that may be warranted to its best execution guidance, including the following:
- How should FINRA’s best execution guidance address member firms’ processes for making decisions to connect, not connect or disconnect from specific execution venues in the absence of the trade-through rule protecting certain venues?
- Are there specific standards that members may apply or should be required to apply, or factors to consider, when making venue connection decisions (e.g., volume or liquidity thresholds, access fees or rebates, connectivity or data costs, order types, latencies or speed bumps)?
- In the absence of defined “automated quotations” and “automated trading centers” for trade-through rule purposes, under what circumstances would firms consider quotes to be or not be immediately accessible?
- Should best execution guidance distinguish between displayed and non-displayed liquidity, or between venues that offer displayed liquidity, non-displayed liquidity or both? If so, how?
- Should FINRA consider additional guidance regarding routing to affiliated venues? If so, what issues are of concern?
- Is there additional data that would be informative to firms in making these determinations?
- Do members anticipate making significant changes to their NMS stock order handling, routing, and execution policies, procedures, or processes in the absence of a trade-through requirement? If so, what changes and why?
- The trade-through rule under Rule 611 applies only to protected quotations, generally limited to displayed round lot quotations in NMS stocks on automated trading centers. However, FINRA understands that many firms today also actively participate in equity markets that are not subject to a trade-through rule, including orders for odd lots in NMS stocks (including fractional share orders), and over-the-counter (OTC) equity securities.
- How do member firms’ order handling, routing and execution practices for odd lots in NMS stocks and OTC equity securities differ from such policies, procedures and processes for round lots in NMS stocks? Are these differences due to the absence of a trade-through requirement or the characteristics of the market?
- Are there elements of firms’ best execution processes for odd lots and OTC equity securities that commenters intend to leverage in connection with round lots in NMS stocks in a post-611 environment? If so, what specific elements and why?
Other potential areas for consideration included access fees and transaction costs, regular and rigorous review versus order-by-order review, institutional versus retail order handling, held versus not-held orders, and extended hours trading.
FINRA said the comments are sought to help “modernize its best execution guidance to facilitate investor protection and market integrity under the existing principles-based standard, and provide member firms with additional interpretive insights and approaches to structure their processes to serve their various customers.”
All interested parties were encouraged to comment. Comments must be received by September 25, 2026.
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