SEC Rule 605 & 606 and best execution reporting

Under Rule 606 of Regulation NMS as adopted, a broker-dealer that routes orders on behalf of customers, will be required to prepare quarterly reports that disclose the identity of the venues to which it routed orders for execution subject to certain exceptions. These reports also will disclose the nature of the broker-dealer's relationship with those venues, including the existence of any internalization or payment for order flow arrangements. Finally, broker-dealers will be required to disclose, on customer request, where they routed a customer's individual orders for execution.

RBC CS uses S3 Matching Technologies, LP as a vendor for this service.

For correspondents following our standard order routing tables, your public disclosure requirements may be met by linking to the RBC CS page of the S3 website.

RBC Correspondent Services Best Execution Committee

The SEC has directed that all brokers have a duty to regularly and rigorously review their order routing decisions to ensure that client orders are routed to destinations where they are likely to receive “best execution.” Factors that are to be considered in such reviews include overall market quality, including the opportunity for an order to receive price improvement, speed of execution, order size, trading characteristics of a particular security, availability of accurate information affecting choices as to the most favorable market, availability of economic access to the various market centers and the cost and difficulty associated with achieving an execution in a particular market center.

The RBC CS Best Execution Committee (“the Committee”) is comprised of senior management from RBC CS Operations and finance. The Committee meets monthly to review statistics and other information pertaining to the execution quality provided by RBC CS’ order routing destinations as well as competing venues. This review is mandated by RBC CS’ written supervisory procedures and utilizes execution statistics required to be published by market centers pursuant to SEC Rule 605 and Rule 606, as provided to RBC CS by S3 Matching Technologies, LP (“S3”). In addition to reviewing statistics and the other factors discussed above, the Committee also reviews order routing processes and technology, and makes suggestions to improve or replace those in place.

Obligations of Correspondents


FINRA recognizes that many firms, specifically those utilizing the services of a clearing firm for the execution of its orders, may never execute a customer order. Nonetheless, no member can transfer its obligation to provide best execution to another member. Therefore, all member firms have an obligation to conduct an independent review for execution quality (see NASD Notice to Members 01-22). FINRA Regulation “believes that an introducing broker/dealer must take reasonable steps to ensure that the introducing broker/dealer and its executing broker/dealer are complying with the duty of best execution. An introducing firm that routes its order flow to its clearing firm…can rely on the clearing firm’s regular and rigorous review as long as the statistical results and rationale of the review are fully disclosed to the introducing firm and the introducing firm periodically reviews how the clearing firm is conducting that review, as well as the results of that review.” Additionally, any correspondent who uses a “customized” routing table and/or routes a material number of orders “away,” and/or directs a material number of orders via RBC CS’ order routing systems to specific destinations, may not be able to rely at all on the regular and rigorous review performed by RBC CS.

For More Information

For more information, please refer to the RBC CS public website and/or accompanying statistics, or contact the RBC Client Service Team.

This information is provided for internal use only by correspondent firms and their Financial Advisors, and is not intended to be an exhaustive treatment of the subject matter, construed as investment advice, or an offer to buy or sell securities or any products or services mentioned. Distribution of any material is subject to the correspondent firms' "Communication with the Public" policies. RBC Correspondent Services reserves the right to change its policies and procedures, and individual program services and requirements without notice.

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