The Securities and Exchange Commission this week voted to propose rules that for the first time would require broker-dealers to disclose the handling of institutional orders to customers. The proposed rules also would expand the information included in existing retail order disclosures. 

Currently, Rule 606 requires broker-dealers to disclose publicly, on a quarterly basis, certain aggregated order routing information for customer orders in NMS securities, and to disclose separately, to a customer upon request, certain customer-specific order routing information for the past six months. The term “customer order” is defined as an order that is not for the account of a broker-dealer, and is less than $200,000 for NMS stocks and less than $50,000 for options. 

Rule 606 currently does not require disclosure of order routing information for institutional-sized orders. At the time Rule 606 was adopted, institutional-sized orders were excluded because they were handled by broker-dealers in a manual, individual manner.  As such, generalized order handling information was not practical.

“These proposed rules are intended to bring order handling disclosure in line with modern technology and market practice, providing valuable information to retail and institutional investors about how their orders are treated,” SEC Chair Mary Jo White said in a statement.

“This information should provide investors more transparency and a powerful new tool to more effectively monitor broker-dealer routing decisions, especially when combined with the additional disclosures from alternative trading systems proposed by the Commission late last year,” White added.

Institutional orders disclosures

The proposed rules would require broker-dealers to provide customers with standardized information about their institutional order handling and execution quality and to disclose publicly the same information on an aggregated basis across all customers. The customer-specific disclosures would help customers assess their broker-dealers’ services, including the handling of potential conflicts of interest, risks of information leakage, and best execution. The public disclosures would assist market participants in assessing and comparing the institutional order handling services provided by broker-dealers, the SEC said.

The proposed rules would require a broker-dealer to provide a customer, upon request, a report on the broker-dealer’s handling of the customer’s institutional orders (orders in National Market System or exchange-listed stocks with an original market value of at least $200,000) that contains specified monthly data for the previous six months.

The report would include the number of: 

Shares sent to the broker-dealer

Shares executed by the broker-dealer as principal

Institutional orders exposed by the broker-dealer through actionable indications of interest, and the venues to which they were exposed

The report also would include the following information for each venue to which the broker-dealer routed institutional orders for the customer, in the aggregate and broken down by passive, neutral, and aggressive order routing strategies as determined and assigned by the broker-dealer:

Information on order routing

Total shares routed

Total shares routed marked immediate or cancel

Total shares routed that were further routable

Average order size routed



Information on order execution

Total shares executed

Fill rate (shares executed divided by the shares routed)

Average fill size

Average net execution fee or rebate (cents per 100 shares, specified to four decimal places)

Total number of shares executed at the midpoint

Percentage of shares executed at the midpoint

Total number of shares executed that were priced on the side of the spread more favorable to the institutional order

Percentage of total shares executed that were priced at the side of the spread more favorable to the institutional order

Total number of shares executed that were priced on the side of the spread less favorable to the institutional order

Percentage of total shares executed that were priced on the side of the spread less favorable to the institutional order

Retail order disclosures

The proposed rules would rename “customer order” to “retail order” and would require enhanced disclosures of retail order routing information. 

Specifically, broker-dealers would be required to reflect the following in their quarterly reports on retail order routing information: 

Separately report limit orders as marketable and non-marketable limit orders

Report routing information by calendar month instead of quarterly and no longer report NMS stocks by listing market

Post the report on a free, publicly-accessible Internet website for three years

Include the following information for the 10 venues to which the largest number of total non-directed orders were routed for execution and for any venue to which five percent or more of non-directed orders were routed for execution:

The net aggregate amount of any payment for order flow received, payment from any profit-sharing relationship received, transaction fees paid per share, and transaction rebates received, both as a total dollar amount and per share for: non-directed market orders, non-directed marketable limit orders; non-directed non-marketable limit orders; and other non-directed orders


Include a description of the terms of any payment for order flow and any profit-sharing arrangements that may influence a broker-dealer’s order routing decision, including, among other things: 

Incentives for equaling or exceeding an agreed upon order flow volume threshold

Disincentives for failing to meet an agreed upon minimum order flow threshold

Volume-based tiered payment schedules

Agreements regarding the minimum amount of order flow that the broker-dealer would send to a venue

Report format

All reports on institutional and retail order handling and routing would be provided using XML and PDF formats as published on the Commission’s website, so that the data in the report would be in a consistent, structured format that would facilitate search capabilities and statistical and comparative analyses across broker-dealers and date ranges. 

Similar to the proposed requirement for the public order handling reports, the proposed rules would require market centers to make order execution reports publicly available for three years.

If approved for publication by the Commission, the proposed amendments will be published on the Commission’s website and in the Federal Register. The comment period for the proposed amendments will be 60 days after publication in the Federal Register.