FINRA sets forth specific guidelines for broker dealers who execute orders for customers on a net transaction basis. A broker dealer who, after receiving a customer’s order, executes that order on a principal basis with another broker dealer and subsequently fills the order at a net price to the customer must first obtain the customer’s consent. A broker dealer must obtain the customer’s written consent and acknowledgement prior to executing a net transaction for any non-institutional customer. Institutional customers may agree to the terms of net transactions in writing or orally on a trade-by-trade basis or may be sent a negative consent letter detailing the terms under which net transactions may be executed by the broker dealer. The negative consent letter must provide the institutional customer a reasonable opportunity to object to net transactions. If the customer does not object, the broker dealer may assume that the institutional customer has consented to the potential terms of any net transaction. All documentation relating to customer consent must be maintained under FINRA Rules.

Need Help Passing Your Series 57 Exam?



Protection Of Customer Orders

Related Articles
  1. Investing

    What Does a Dealer Do?

    Dealers possess certain qualities that distinguish them from brokers and traders.
  2. Insights

    What's a Dealer Market?

    In a dealer market, market participants buy and sell through dealers who are designated as market makers.
  3. Investing

    Picking Your First Broker

    If you're a rookie investor, your first big investment decision should be an informed one.
  4. Trading

    Is Your Forex Broker A Scam?

    While the forex market is slowly becoming more regulated, there are many unscrupulous brokers who should not be in business.
  5. Trading

    How Forex Brokers Make Money

    Forex brokers set their prices based on commission, spread, or a combination of both. Traders have to be cautious in the thinly regulated forex market.
  6. Trading

    Broker Or Trader: Which Career Is Right For You?

    A day in the life of a broker or trader is an exciting and varied one. Find out how to decide between these two financial professions.
  7. Small Business

    What's Involved in Customer Service?

    Customer service is the part of a business tasked with enhancing customer satisfaction.
  8. Financial Advisor

    Is Your Broker Acting In Your Best Interest?

    Learn the clues you'll need to determine whether you've chosen a reputable professional.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center