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- State Street Challenging BNY Mellon As Largest Custody Bank
- Changes to FINRA Advisory Committees: Phase 1
- SEC Approves CAT Fee Dispute Resolution Process
- Boston-Area Consultant & Friend Settle SEC Insider Trading Charges
- SEC Chair Clayton: Statement on Status of the Consolidated Audit Trail ('CAT')
- Goldman to Launch $5bn Fund with China Investment Corp.
- Wells Fargo Launches Robo-Adviser Targeting Millenial Investors
- Barclays Fails to End U.S. 'Dark Pool' Class Action
- Goldman Sachs' Chief Risk Officer, Craig Broderick, to Retire
- Time to Renew FINRA Registrations - B/D, IA, Agent, IA Rep, Branches
- New Jersey’s Next Governor Could Be a Democrat Who Worked at Goldman Sachs
- FINRA New York Region Networking Seminar - December 1st
- SEC Approves “Pay-to-Play” and Related Rules for Capital Acquisition Brokers
- Hedge Fund Giant Paul Singer Targeted for Destruction by Steve Bannon
- Saudi Arabia's arrest of Prince Alwaleed 'would be like arresting Warren Buffett or Bill Gates' in the US
- Arrest of Billionaire Saudi Prince Touches Sizable Stakes - Citigroup, Twitter, Lyft
- New York Fed President William Dudley set to announce retirement
- FINRA Arbitration Panel Rules Against ex-LPL Broker in $30Mn Lawsuit vs. Firm
- OOPS! Goldman, JPMorgan, BofA Fail in Pricing an IPO
- Former Merrill Broker Pleads Guilty to Fee Fraud, Faces Up To 25 Years
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NEWSLETTERS & ALERTS
Payment of Order Flow vs. Best Execution: Massachusetts Investigates
[Photo: William Galvin, Secretary of Commonwealth of Massachusetts]
by Howard Haykin
William Galvin, the top securities regulator for the Commonwealth of Massachusetts, announced that an investigation is underway into payment for order flow and best execution practices at 7 of the country’s top retail brokerage firms: (i) Fidelity Investment; (ii) Charles Schwab; (iii) Scottrade; (iv) TD Ameritrade; (v) E*Trade Financial; (vi) Edward D. Jones; and, (vii) Morgan Stanley.
The regulator sent letters to each firm requesting information about policies and practices for routing customer buy and sell orders to exchanges that offer payments for order flow, as well as procedures for ensuring best execution on trades. In his announcement, Mr. Galvin referred to a recent opinion piece in the NYTimes that said customers don't get the best price when brokers choose exchanges for the rebates they offer.
"My office is looking into the veracity of these assertions and whether the brokers are meeting their best execution obligation to their customers. If financial rebates or kickbacks create a conflict that results in less than the best deal for the investors, this practice must stop."
According to recent regulatory filings:
- Schwab, sent 29% of customer orders to KCG, for which it received on average less than $.0009 a share; it also sent 27% to Citadel in a similar arrangement.
- Fidelity sent 34% of its orders to Citadel, and 32% to KCG.
- E*Trade sent 41% of its orders to G1, a former affiliate that pays on average $.0001 a shar; it also sends orders to Citadel, BATS, KCG and Citi, among others.
FINRA conducted a comprehensive sweep of “Order Routing and Execution Quality of Customer Orders” in July 2014.
To access Lightspeed Trading’s payouts, click on “Routing Fees.”