Best Execution and Inter-positioning
The best execution rule requires broker-dealers to make reasonable efforts to find as favorable a price as possible for a customer’s transaction given the prevailing conditions of the market. However, best execution means more than getting the customer a favorable price. In deciding how and where to best execute a trade, a broker-dealer is expected to consider these factors:
- 1. the character of the market for the security: such as its price, volatility and liquidity;
- 2. the size and the type of transaction;
- 3. the number of markets checked;
- 4. the accessibility of the quotation; and
- 5. the terms and conditions of the transaction as communicated to the broker-dealer.
When a member firm gets an order, it must go directly to a market maker. It cann