What do best execution rules require broker-dealers to do when executing customer orders?

Best execution rules mandate that broker-dealers use reasonable diligence to obtain the best price possible for their customers' orders. This standard emphasizes the obligation of broker-dealers to take all necessary steps to ensure that their clients receive favorable trade prices. It takes into account various factors, such as the size of the order, market conditions, and the available trading venues. The goal is to achieve the most advantageous outcome for the client, considering these dynamic factors.

The notion of “reasonable diligence” means that broker-dealers must actively monitor the market and be aware of different execution venues to execute trades at a price that reflects the best available opportunities for their clients. It does not guarantee the highest price in every instance but rather ensures a thoughtful process and consideration of all market factors at play.

While seeking the highest price or executing quickly might benefit a trader in certain situations, these aspects alone do not fully satisfy the best execution obligation. Executing orders through only the primary market would limit the broker's ability to find the best price across multiple venues, which is counterproductive to fulfilling the best execution mandate.