Order Routing/Execution

Order Routing/Execution

SEC Rules 605 and 606
Disclosure of Order Execution and Routing Practices

Rule 605 (Monthly report)

This rule requires “market centers” that trade national market system stocks to make publicly available standardized, monthly statistical information about “covered order” executions, as defined by the rule. FBR Capital Markets & Co. (FBRC) is a NASDAQ market maker and therefore considered a “market center”.

Rule 605 is intended to promote visibility and competition in order execution quality, particularly with respect to execution price and speed. To enable cross-market comparisons, the Rule establishes uniform measures of execution quality, including effective spread, rate of price improvement and disimprovment, fill rate and execution speed. The rule also requires the statistics to be categorized by individual security, order type and size (100-499 shares, 500-1999, 2000-4999, 5000-9999). It is important to note that orders for 10,000 shares or more are exempt from the rule and are therefore not included in the statistics.

Each market center is required to prepare and make publicly available monthly reports in electronic form, free of charge, and available for downloading from an internet site. The following link, http://private.bestxstats.com/605_public/?bxs_mpid=fbr_capital_mkts is provided for public review of FBRC execution statistics.  This information is presented in accordance with the SEC Rule 605 requirements.

Rule 606 (Quarterly report)

This rule requires broker/dealers that route orders in equity and option securities to disclose the identities of the execution venues to which they route orders on behalf of customers, and the material aspects of the relationships the broker/dealer may have with those venues.

Each routing broker/dealer is required to prepare and make publicly available quarterly reports in electronic form, free of charge, and available for downloading from an internet site. The following link, http://private.bestxstats.com/606_public/?company=fbrc is provided for public review of FBR Capital Markets & Co. (FBRC) execution statistics. This information is presented in accordance with the SEC Rule 606 requirements.

Definitions:
Market Center
is defined by Rule 600 as “any exchange market maker, OTC market maker, alternative trading system, national securities exchange, or national securities association.” 
Execution Venue
is a market center that receives and executes 5% or more of the reporting broker/dealer’s total covered orders, per Rule 606. The reporting broker/dealer is exempted from disclosing those venues that receive less than 5% of the total covered orders as long as the broker/dealer has identified the venues for at least 90% of its total covered orders. 
Covered Orders
as defined in Rule 600, include orders only for Exchange-Listed securities, market orders or limit orders received and executed by a market center during regular trading hours (defined in paragraph (b)(64) of Rule 600 as between 9:30 a.m. and 4:00 p.m. Eastern Standard Time). Furthermore, the definition of a covered order excludes certain types of orders, such as but not limited to, any order for OTC Bulletin Board and Pink Sheet securities, options, orders which a customer requested special handling for execution, orders to be executed at a market opening or closing price, stop orders, all-or-none orders, short sales, orders submitted on a “not held” basis, orders for other than regular settlement, orders for 10,000 shares or more and orders executed at prices unrelated to the market price at the time of execution. 

Additional information regarding the official rule release, interpretations and exemptions can be obtained directly from the SEC at www.sec.gov and the FINRA at www.finra.org.

ALL INFORMATION IS PROVIDED ON AN “AS IS” BASIS BY FBR CAPITAL MARKETS & CO. WHILE WE BELIEVE THE INFORMATION TO BE ACCURATE AS OF THE DATE OF ITS PUBLICATION, WE MAKE NO REPRESENTATION AND DISCLAIM ANY WARRANTY AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OF SUCH INFORMATION OR ITS FITNESS FOR ANY PURPOSE. FURTHER, THIS INFORMATION DOES NOT REPRESENT AN ENDORSEMENT OF ANY SECURITY OR MARKET PARTICIPANT.