FINRA Fines Deutsche Bank Securities for Best Execution Violations

On Tuesday, the Financial Industry Regulatory Authority (FINRA) said that it had imposed a $2 million fine on Deutsche Bank Securities for best execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term violations. According to the press release, the banking institution failed to comply with its obligation to seek the best execution for its customers’ orders.

FINRA Rule 5310 requires firms to seek the most favourable terms reasonably available for customers’ orders. For this purpose, firms must conduct reviews in order to evaluate the quality of order execution their customers receive under the firm’s current routing arrangements, as well as the execution quality their customer orders could receive under alternative routing arrangements.

In Rule 5310, firms are required to consider several factors (including price improvement and speed of execution) when conducting these reviews. However, FINRA claims that Deutsche Bank Securities failed to follow this standard.

Case Background: SuperX Trading System

The authority stated that Deutsche Bank Securities owned and operated a trading system known as SuperX from January 2014 to May 2019 during the relevant period. As part of its smart order routing, the firm routes customers’ marketable orders to SuperX before routing any part of the order to an exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term, unless customers opt out of this routing preference. 'SuperX ping' was the name that was given to this preference.

However, the SuperX ping allegedly created an inherent delay for orders not fully executed in the firm’s ATS.

“The duty to seek best execution for customer orders is a fundamental obligation of any broker-dealer that buys or sells securities on behalf of customers. We will continue to pursue disciplinary action against firms that fail to use reasonable diligence to execute customer transactions so that the price is as favorable as possible under prevailing market conditions,” Jessica Hopper, the Executive Vice President and Head of FINRA’s Department of Enforcement, commented.