Sunlight on Executions
Traders Magazine, March 2002
No more mysteries about how and why broker dealers route orders. At least that's the hope of regulators who put new order routing and disclosure rules into effect late last year. Regulators believe that in order to encourage best execution, it is important to show investors exactly how brokerages are routing trades. There is no consensus on what it all means, no agreement on how investors should interpret the data. Still, some brokers are acting as if the information required by SEC Rules 11Ac1-5 and 11Ac1-6, isn't important. I think they couldn't be more wrong. In 1999, the Securities and Exchange Commission found that payment for order flow was affecting execution quality in over half the brokerage firms the agency surveyed. The problem remains. Although some progress has been made, trade execution woes are an open secret.
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