"FINRA Forward" Turns its Focus to Best Execution

On July 24, 2026, the Financial Industry Regulatory Authority (FINRA) published a request for comment (Regulatory Notice 26-15) soliciting public input on modernizing its best execution guidance under Rule 5310. Notably, Notice 26-15 does not propose any changes to the text of Rule 5310 but instead asks for input on a wide range of execution quality questions.

FINRA’s notice responds in part to the SEC’s June 11, 2026, proposed changes to Regulation NMS, including to rescind both the trade-through prohibition under Rule 611 and the restrictions in Rule 610(e) on locked or crossed quotations. Rule 611 has long functioned as a minimum requirement for a firm’s best execution obligations under Rule 5310. The potential removal of Rule 611 and 610(e) raises operational questions firms will need to consider no matter how FINRA’s guidance on Rule 5310 evolves.

While FINRA states that it believes its principles-based approach to the duty of best execution under Rule 5310 continues to serve investors and the market effectively, broker-dealers that have been caught in the crosshairs of the regulator’s lengthy investigations in this space may disagree. With best execution now a focus of FINRA’s rule modernization efforts, broker-dealers have a chance to shape the conversation and clarify future guidance.

FINRA’s review of Rule 5310 and related guidance identifies the items below as potential areas for consideration.

Identified Areas of Consideration

Best Execution Following the Recission of Rule 611 and 610(e)

If the SEC rescinds the Rule 611 trade-through protection, firms lose the regulatory backstop requiring routing to venues with protected quotes. Among other things, FINRA requests comment on how venue connection decisions should be made, whether the national best bid and offer (NBBO) remains a valid benchmark, and whether alternative benchmarks (e.g., volume-weighted average price or time-weighted average price) should be considered. FINRA additionally requests comment on whether further order-handling guidance regarding locked and crossed markets should be provided if Rule 611(e) is rescinded.

Access Fees and Transaction Costs

Because the SEC is separately reviewing Rule 610(c) access-fee caps, FINRA asks whether its guidance should be modified to address access costs, whether firms’ decisions on fees being passed through or absorbed should affect their best execution analysis, and how firms should best assess the relationship between transaction fees and opportunities for price improvement on different venues.

Regular and Rigorous Review Versus Order-by-Order Review

FINRA asks whether it should retain its longstanding guidance that internalized orders require order-by-order review and whether a smart order router (SOR) with embedded best-execution logic could itself satisfy that standard — a potentially significant shift for firms that internalize flow.

Institutional Versus Retail Order Handling

FINRA acknowledges that under the best execution reasonable diligence standard, members must consider customers’ expectations when handling an order and that these expectations vary based on whether it is a retail or institutional customer; institutional customers have to balance additional considerations. FINRA considers whether the execution quality factors under Supplementary Material .09 to Rule 5310 adequately apply to institutional customers and algorithmic or block trading strategies. FINRA comments on additional issues such as how request-for-quote platforms or single-dealer platforms should be considered from a best execution perspective and how FINRA should consider parent-child order handling.

Held Versus Not-Held Orders

FINRA flags concern about “blanket” not-held designations in retail account agreements and about reclassifying held retail orders as not-held when routed away; FINRA seeks comment on whether additional guidance would be beneficial.

Extended Hours Trading

With markets planning increased availability of extended hours trading for retail investors, FINRA emphasizes that best execution obligations apply to all orders regardless of the time when an order is received or executed. FINRA requests comment on whether additional guidance could better assist firms in providing best execution during extended hours trading.

Other Areas for Potential New Guidance

• possible Rule 5310 safe harbors for specified routing or review methodologies

• potential guidance related to best execution obligations of different firms within a routing chain (e.g., introducing and clearing firms or wholesaler/consolidators) for an order

• guidance specific to listed options, given that options market structure differs meaningfully from equities

• preliminary questions on new and emerging technologies such as AI-driven order handling and tokenized securities

Takeaways for Broker-Dealer Legal and Compliance

• Assess comment strategy. This is a genuine opportunity to shape guidance before it is finalized.

• Inventory current best-execution dependencies on Rule 611/NBBO. Supervisory systems, exception reports, and written supervisory procedures that reference “protected quotations” or the NBBO as a compliance touchstone should be flagged for potential rework if Rule 611 is rescinded.

• Review held/not-held order practices. Firms should review not-held designations for retail customers, given FINRA’s explicit concern in Section 7 of Notice 26-15.

• Flag internal reliance on SOR-based execution for internalized flow. The order-by-order review standard for internalized orders may be revisited