Regulatory Notice 26-15: FINRA Requests Comment on Modernizing FINRA’s Best Execution Guidance – Fixed-Income Markets
Summary
SIFMA 1 provided comments to FINRA on its Regulatory Notice 26-15 (“RN”) 2 to address fixed-income best execution requirements.
Excerpt
1. Executive Summary
FINRA Rule 5310(a)(1) requires that, in any transaction for or with a customer or a customer of another broker-dealer, a member and persons associated with a member use reasonable diligence to ascertain the best market for the subject security and buy or sell in such market so that the resultant price to the customer is as favorable as possible under prevailing market conditions.
However, under the current fixed-income market structure, for transactions with institutional clients, firm quotes of sufficient size for the CUSIP in question are rarely disseminated from other market participants for a dealer to act on. As a result, when a dealer provides firm quotes to its institutional clients, it almost always looks to its fair pricing responsibilities. At the same time, a dealer trading with institutional customers is also obliged to maintain a robust best execution program for the rare instance when a firm quote of sufficient size for the CUSIP in question from another market participant arises. Separately, institutional customers are themselves sophisticated market participants with their own execution obligations and market access.
Accordingly, amendments to the best execution rules applicable to fixed-income trading are warranted. In this letter we suggest that:
- Fixed-income market structure is very different from equity market structure.
- Institutional investors are highly sophisticated and capable of independently judging execution opportunities in fixed-income markets.
- Existing rules protect institutional investors in fixed-income markets.
- FINRA should implement an exception from best execution requirements for institutional counterparties of broker-dealers in fixed-income markets.
- FINRA and MSRB should explore better alignment of their fixed-income best execution rules.
We believe these recommendations are justified because of institutional sophistication, market structure, and protection provided by existing rules, as well as the benefits to efficiency that would come from alignment of the parallel FINRA and MSRB rulesets.
- SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed-income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).
- “FINRA Requests Comment on Modernizing FINRA’s Best Execution Guidance” (RN 26-15), July 24, 2026. Available here: https://www.finra.org/rules-guidance/notices/26-15.