New Requirements for Broker-Dealer Execution Quality Reports

Amendments to Rule 605 Also Require Attention from Investment Advisers and Investment Company Directors

The U.S. Securities and Exchange Commission (SEC) adopted amendments to Rule 605 of Regulation NMS under the Exchange Act on March 6, 2024.

Rule 605 requires market centers to publish reports on the execution quality they deliver each month. The amendments will extend the rule’s reach to broker-dealers that introduce or carry at least 100,000 client accounts (with a look through for omnibus accounts). In addition, broker-dealers operating single dealer platforms must prepare a separate report for activity specific to these platforms.

The amendments also expand the types of trading that must be reported, including certain off hours trading, refine the rule’s reporting requirements for time to execution and realized spread, and require six additional statistical measures of execution quality. The amended rule also includes a new requirement for a summary report.

The amended rule will become effective sixty days after publication in the Federal Register, and the compliance date will be 18 months after the effective date. Reports must be published within one month after the end of the month addressed in the report.

Our guidance

Broker-dealers
Systems at affected broker-dealers are likely to require significant development to meet the extensive new reporting requirements. Efforts to scope out a plan of work, timelines, and resourcing should begin as soon as possible.

Investment Advisers and Investment Companies
Although amended Rule 605 will not apply to them directly, investment advisers, investment companies, and investment company directors will also need to consider how they will use the new reports to inform their respective best execution processes, a task best begun sooner rather than later, given the complex and technical nature of the new information these reports will provide.

How we help

The compliance environment has never been more complex or demanding. We can help you to navigate the evolving regulatory landscape while considering the complexity of your firm’s unique compliance requirements. ACA Signature can help.

With ACA Signature, you can choose the combination of compliance advisory,  innovative technology, managed services, and cybersecurity to create a scalable solution that is right for your firm and gain expert insight, guidance, and support as you navigate emerging compliance and risk challenges. 

Reach out to your ACA consultant, or contact us to find out how ACA Signature can help transform your firm’s compliance program. 

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