On July 24, 2026, the Financial Industry Regulatory Authority (“FINRA”) published Regulatory Notice 26-15, seeking input on potential changes to modernize its best execution guidance. FINRA issued the notice in light of “significant market structure developments,” including a recent proposal by the Securities and Exchange Commission (“SEC”) to rescind Regulation National Market System (“Reg NMS”) Rule 611 (the “trade-through rule”) and Rule 610(e) (the prohibition on locking and crossing quotations in NMS stocks). The notice is a proactive response to the SEC’s proposed amendments to Reg NMS, and it suggests that FINRA intends to engage with the industry on potential adjustments to its best execution rule, Rule 5310, and related guidance. While the notice is largely focused on these proposed adjustments, FINRA also requests input on eight other issues related to best execution, including: the application of Rule 5310 to listed options; best execution requirements for institutional orders (v. retail orders); and the implications of emerging technologies such as generative artificial intelligence and tokenization. Comments are due on September 25, 2026.
Background on Intersection Between Reg NMS and FINRA Rule 5310
The SEC adopted Reg NMS in 2005. Rule 611 requires every “trading center” – which includes national securities exchanges, alternative trading systems, over-the-counter market makers and any broker-dealer that internally executes orders – to establish, maintain and enforce written policies and procedures reasonably designed to prevent “trade-throughs” of protected quotations in NMS stocks. Separately, Rule 610(e) requires each exchange and national securities association (collectively, “self-regulatory organizations” or “SROs”) to establish, maintain and enforce rules to prevent their members from displaying quotations that “lock” a protected quotation (which occurs when a bid is equal to an offer) or “cross” a protected quotation (which occurs when a bid exceeds an offer). Rule 610(e) also requires SRO rules reasonably designed to reconcile locked and crossed quotations in NMS stocks.
When the SEC adopted Reg NMS, it noted that Rule 611 “in no way lessens a broker-dealer’s duty of best execution.”1 Rather, Rule 611 was intended to “backstop a broker's duty of best execution on an order-by-order basis by prohibiting the practice of executing orders at inferior prices, absent an applicable exception.”2 Now, the SEC takes the position that this backstop is no longer needed. The Federal Register notice proposing Rule 611’s rescission explains that “Rule 611 is no longer needed to backstop a broker’s duty of best execution given the evolution of U.S. equity markets since 2005.”3
FINRA Requests Comment on Nine Areas
FINRA’s questions in the regulatory notice are divided into nine categories. We summarize each category and some notable questions raised by FINRA below.
1. Best execution post-rescission of Rules 611 and 610(e).
- The notice acknowledges that the rescission of Rule 611 may result in firms connecting to fewer execution venues. FINRA is seeking guidance on the factors that member firms should consider when deciding to connect to a specific execution venue.
- FINRA asks whether the NBBO will remain an important benchmark for firms following the rescission of Rule 611. Currently, Rule 611 requires firms to execute orders at a price that is equal to or better than the NBBO.
- FINRA requests comment on the circumstances under which a member may access displayed liquidity at a price inferior to the best displayed price.
- FINRA is also considering potential “safe harbors” under Rule 5310, such that activity falling within the scope of the safe harbors would be considered to be in compliance with a firm’s best execution obligation. These include safe harbors for “executions pursuant to documented regular and rigorous methodologies” or “large order executions meeting a specified benchmark(s).”
2. Relationship between access fees and transaction costs. FINRA requests comment on the relationship between transaction costs, including venue access fees, and the duty of best execution. FINRA notes that “transaction costs” is explicitly listed as a factor members should consider in conducting their regular and rigorous reviews of execution quality. However, “the costs of a venue may not inappropriately affect a firm’s order routing decisions.”4 FINRA also asks whether access fees should be reflected in the price obtained for the customer.
3. Best execution review standards and order-by-order review. Rule 5310 requires FINRA members to conduct a “regular and rigorous review” of execution quality if they do not conduct an order-by-order review. FINRA is seeking feedback on various topics related to order-by-order review, including whether order-by-order review should be required for internalized orders and whether “a smart order router (‘SOR’) with built-in best execution logic” should be considered an order-by-order review and, if so, under what circumstances or conditions.
4. Institutional orders. FINRA is seeking comment on the application of Rule 5310 to institutional orders, including parent-child orders, orders handled via algorithmic trading strategies, pre-negotiated block trades and directed orders. FINRA also asks whether a broker-dealer operator of a single-dealer platform (“SDP”) or a request-for-quote (“RFQ”) platform should owe an institutional customer best execution obligations beyond the requirements of Supplementary Material .08. This supplementary material states that, when a member receives an unsolicited instruction from a customer to route that customer’s order to a particular market for execution, the member is not required to make a best execution determination beyond the customer’s specific instruction, but must execute the order promptly and in accordance with the terms of the order.
5. Introducing and receiving firm obligations. FINRA is considering additional guidance on the division of responsibility among different members in the routing chain for an order. Among other things, the regulatory notice requests comment on whether additional guidance regarding the prohibition on interpositioning would be useful. The notice also requests comment on FINRA Rule 5310.09(c), which, subject to certain due diligence requirements, permits a routing firm to rely on a receiving firm to conduct regular and rigorous review of execution quality.
6. Extended trading hours guidance. FINRA solicits comment on any guidance required for extended trading hours, including guidance related to order handling, routing and execution policies, procedures and processes. The notice also notes that FINRA Rule 5310.06, which sets forth specific considerations for orders involving securities with limited quotations or pricing information, may be relevant for extended hours trading.
7. “Held” and “not held” order distinctions. FINRA states that some firms include what FINRA characterizes as “blanket” provisions in retail customer agreements stating that all or a subset of the customer’s orders will be treated as not held. FINRA states (without further support and without analyzing the customer documentation) that retail customers expect their orders to be immediately and fully executed at the best price available in the marketplace. The regulatory notice asks if there is specific best execution-related guidance that FINRA should consider regarding the treatment of orders as held or not held, what considerations may warrant treating retail customer orders as not held, and what modifications of the best execution obligation should result, if any. FINRA is also requesting comments on whether there should be other specific guidance allowing for flexibility to delay held orders in certain circumstances (e.g., if there is a concern about fraud). This question highlights the challenges member firms face when they receive an executable order that they believe may be fraudulent – either to potentially violate their best execution obligation by not executing the order, risking regulatory problems, or execute a likely fraudulent order creating litigation and financial risk.
8. Listed options guidance. Recognizing that “the market structure for listed options differs from the market structure for listed equities,” FINRA requests comment on whether further guidance is needed for listed options. For example, FINRA asks whether additional guidance is needed on the evaluation of execution quality by introducing firms both across consolidators and across the options exchanges to which consolidators route. Given that monthly execution quality reports under Exchange Act Rule 605 are not available for listed options execution venues, FINRA also asks what information is available to firms to evaluate execution quality for listed options.
9. Impact of emerging technologies. Finally, FINRA asks about the implications of emerging technologies like generative artificial intelligence and tokenization for best execution. FINRA asks firms to explain how they currently use artificial intelligence to facilitate order handling, routing or execution and requests comment on whether best execution guidance specific to tokenized securities is needed.
FINRA’s request for comment gives firms an opportunity to shape the next generation of best execution guidance. Areas for comment include the impact of potential Reg NMS amendments, unresolved issues involving options and institutional orders, and the application of best execution principles to emerging technologies such as artificial intelligence and tokenization.
