January 24, 2022

Volume XII, Number 24

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January 21, 2022

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FINRA Releases New Targeted Exam Letter Regarding Order Routing Conflicts

On November 10, the Financial Industry Regulatory Authority released the contents of a new Order Routing Conflicts targeted exam letter that certain member firms may receive. FINRA uses targeted exams (e.g., sweeps) to gather information on emerging issues and uses such information to pinpoint regulatory response to such issues. FINRA chooses the identity of member firms that will participate in a sweep based upon a number of factors.

The new Order Routing Conflicts letter requests information relating to receipt of order routing inducements and how they affect a firm’s order routing practices and decisions. Information requested includes: 1) how the firm quantifies benefits to its customers from the firm’s receipt order routing inducements; 2) how the firm fulfills its duty of best execution when routing orders to market centers with materially higher transaction costs than other market centers; and 3) how the firm handles conflicts between the firm’s best execution obligation and the firm’s financial interest in such inducements.

The full text of the letter is available here.

©2022 Katten Muchin Rosenman LLPNational Law Review, Volume VII, Number 321
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About this Author

Our Financial Services Practice advises a broad spectrum of domestic and international fund managers, trading advisors, banks, brokerages and proprietary trading firms in all aspects of exchange-traded and over-the-counter commodities, securities and derivatives transactions. We help clients find business-based solutions and make business-driven decisions that are in compliance with applicable regulatory requirements. Our lawyers have extensive experience in the financial markets and are fully attuned to the need to provide advice quickly and efficiently in light of the time-sensitive and...

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