SEC Rule 605

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SEC Rule 605 is a regulation established by the U.S. Securities and Exchange Commission (SEC) that requires broker-dealers to report on the quality of execution of orders executed on behalf of customers in the equities market. The rule mandates the disclosure of information related to the speed, price, and size of orders executed for customers, as well as the types of venues where the trades were executed.[1][2]

The purpose of SEC Rule 605 is to promote transparency and fairness in the equities market by providing customers with information that allows them to evaluate the quality of execution they receive from their broker-dealers. This information can assist customers in making informed decisions regarding their trades, such as whether to trade on a particular venue or with a particular broker-dealer.[3]

SEC Rule 605 requires broker-dealers to provide customers with monthly reports that detail the execution quality of their orders. The reports must include data on the speed of execution, the price of the executed trade relative to the national best bid and offer, and the size of the trade. The reports must also include information on the types of venues where trades were executed, such as electronic communication networks or dark pools.

Among other things, the rule requires that the reports are prepared in an electronic format available for downloading from an website that is free and readily accessible to the public.