Flexible standard will help firms pursue the best execution outcomes for investors as U.S. equity market structure evolves
Washington, D.C. — MFA urged the Financial Industry Regulatory Authority (FINRA) to preserve its principles-based best-execution framework as it modernizes its guidance in a comment letter submitted Friday. The framework allows firms to consider the facts and circumstances of each order when pursuing the best execution outcome for investors.
“Investors are best served by firms that take a variety of investor goals into account when seeking best execution,” said Jennifer Han, MFA Chief Legal Officer. “FINRA’s principles-based framework gives firms the flexibility to consider the full range of factors that determine execution quality, supporting more efficient markets and better outcomes for investors.”
Best execution for large and complex trades considers more than just the best displayed price. Prescriptive routing or price requirements could prevent firms from pursuing the execution strategy that best serves their customers. FINRA should continue to allow firms to consider the full execution outcome, including liquidity, market impact, information leakage, execution certainty, speed, and transaction costs.
The letter also notes that FINRA is considering changes to its best-execution guidance while the SEC weighs whether to rescind Rule 611 of Regulation NMS. That uncertainty makes it difficult to determine what revisions will ultimately be appropriate because the rules governing how firms route orders could change significantly. Any changes to FINRA’s guidance should account for the outcome of the SEC’s rulemaking.
Read the full letter here.
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About the global alternative asset management industry
The global alternative asset management industry — including hedge funds, private credit funds, and hybrid funds — serves thousands of public and private pension funds, charitable endowments, foundations, and other global institutional investors. The industry provides portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets throughout the economic cycle.
About MFA
Managed Funds Association (MFA), based in Washington, D.C., New York City, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest it, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 180 fund manager members, including traditional hedge funds, private credit funds, and hybrid funds, that employ a diverse set of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors diversify their investments, manage risk, and generate attractive returns throughout the economic cycle.
