Order Routing and Execution Quality: SEC Rule 606 & Rule 607 Disclosures
Under SEC Rule 607 (Payment for Order Flow) and Rule 606 (Order Routing Practices), what disclosures must a retail broker-dealer provide to customers regarding order routing arrangements?
Broker-dealers must disclose payment for order flow policies upon account opening and annually (Rule 607), and publish quarterly public order-routing venue reports (Rule 606).
Complete Analysis & Legal Rationale
Under SEC Rule 607, broker-dealers must disclose to customers in writing upon opening a new account and annually thereafter: (1) Whether payment for order flow is received for directing customer orders, and (2) The firm's policies regarding payment for order flow. Under SEC Rule 606, broker-dealers must publish quarterly public reports detailing the top venues to which non-directed customer orders were routed for execution and any material relationships or financial payments received from those venues.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Broker-dealers must disclose payment for order flow policies upon account opening and annually (Rule 607), and publish quarterly public order-routing venue reports (Rule 606).
Fails to adhere to trade execution and settlement rules regarding B.
Fails to adhere to trade execution and settlement rules regarding C.
Fails to adhere to trade execution and settlement rules regarding D.
Official Standard: Under SEC Rule 607, broker-dealers must disclose to customers in writing upon opening a new account and annually thereafter: (1) Whether payment for o