Notice2026-00113
Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt a New Rule 5310
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 8, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 5 (Thursday, January 8, 2026)</title>
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[Federal Register Volume 91, Number 5 (Thursday, January 8, 2026)]
[Notices]
[Pages 731-734]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-00113]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104543; File No. SR-NYSE-2025-50]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt a New Rule 5310
January 5, 2026.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934
[[Page 732]]
(``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that
on December 22, 2025, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items II and
III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to a new Rule 5310 governing member
organization's best execution obligations based on Nasdaq PHLX Rule
General 9, Section 11. The proposed rule change is available on the
Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a> and at the principal office of the
Exchange.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes a new Rule 5310 that would govern member
organization's best execution obligations. Proposed Rule 5310 is based
on Nasdaq PHLX Rule General 9, Section 11 (Best Execution and
Interpositioning). The purpose of the proposed rule is to enhance
customer order protection by helping customers to receive efficient
executions of their transactions at the best market prices.
Background and Proposed Rule Change
Nasdaq PHLX Rule General 9, Section 11, adopted in 2010, was based
on NASD Rule 2320.\4\ In 2011, the Financial Industry Regulatory
Authority (``FINRA'') adopted NASD Rule 2320 as FINRA Rule 5310.\5\
Both rules require broker-dealers to use ``reasonable diligence'' to
ascertain the best market for a security and execute trades in such
market so that the resultant price to the customer is as favorable as
possible under prevailing market conditions. Other self-regulatory
organizations have similar best execution rules.\6\
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\4\ See Securities Exchange Act Release No. 62877 (September 9,
2010), 75 FR 56633 (September 16, 2010) (SR-PHLX-2010-79) (Order
Approving a Proposed Rule Change, as Modified by Amendment No. 1,
Relating to the Establishment of NASDAQ OMX PSX as a Platform for
Trading NMS Stocks).
\5\ See Securities Exchange Act Release No. 65895 (December 5,
2011), 76 FR 77042 (December 9, 2011) (SR-FINRA-2011-052) (Order
Granting Approval of Proposed Rule Change To Adopt NASD Rule 2320
(Best Execution and Interpositioning) and Interpretive Material
(``IM'') 2320 as FINRA Rule 5310 in the Consolidated Rulebook)).
\6\ See, e.g., Municipal Securities Rulemaking Board (MSRB) Rule
G-18 (Best Execution).
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The Exchange proposes to adopt a new Rule 5310 that would govern
the best execution obligations applicable to member organizations and
persons associated with member organizations based on the Nasdaq PHLX
rule.
Proposed Rule 5310(a)(1) would provide that, in any transaction for
or with a customer or a customer of another broker-dealer, a member
organization and persons associated with a member organization shall
use ``reasonable diligence'' to ascertain the best market for the
subject security and buy or sell in such market so that the resultant
price to the customer is as favorable as possible under prevailing
market conditions. The proposed Rule would identify five factors among
those to be considered in determining whether a member organization has
used reasonable diligence:
(1) the character of the market for the security, e.g., price,
volatility, relative liquidity, and pressure on available
communications;
(2) the size and type of transaction;
(3) the number of markets checked;
(4) accessibility of the quotation; and
(5) the terms and conditions of the order which result in the
transaction, as communicated to the member organization and persons
associated with the member organization.\7\
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\7\ See proposed Rule 5310(a)(1)(A)-(E).
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Proposed Rule 5310(a)(1) is based on Nasdaq PHLX Rule General 9,
Section 11(a)(1)(A)-(E) without change.
Proposed Rule 5310(a)(2) would prohibit a member organization or
person associated with a member organization, in any transaction for or
with a customer or a customer of another broker-dealer, from
interjecting a third party between the member organization or
associated person and the best market for the subject security in a
manner inconsistent with paragraph (a)(1) of the proposed Rule.
Proposed Rule 5310(a)(2) is based on Nasdaq PHLX Rule General 9,
Section 11(a)(2) without change.
Proposed paragraph (b) would provide when a member organization
cannot execute directly with a market maker but must employ a broker's
broker or some other means in order to insure an execution advantageous
to the customer, the burden of showing the acceptable circumstances for
doing so would be on the retail firm. The proposed Rule would further
provide that examples of acceptable circumstances would be where a
customer's order is ``crossed'' with another retail firm which has a
corresponding order on the other side, or where the identity of the
retail firm, if known, would likely cause undue price movements
adversely affecting the cost or proceeds to the customer. Proposed Rule
5310(b) is based on Nasdaq PHLX Rule General 9, Section 11(b) without
change.
Proposed paragraph (c) would provide that failure to maintain or
adequately staff a department assigned to execute customers' orders
cannot be considered justification for executing away from the best
available market; nor can channeling orders through a third party as
described above as reciprocation for service or business serve to
relieve a member organization of its obligations. The proposed Rule
would further provide that channeling of customers' orders through a
broker's broker or third party pursuant to established correspondent
relationships under which executions are confirmed directly to the
member organization acting as agent for the customer, such as where the
third party gives up the name of the retail firm, would not be
prohibited if the cost of such service is not borne by the customer.
Proposed Rule 5310(c) is based on Nasdaq PHLX Rule General 9, Section
11(c) without change.
Proposed paragraph (d) would provide that a member organization
through which a retail order is channeled, as described in the proposed
Rule, and which knowingly is a party to an arrangement whereby the
initiating member organization has not fulfilled its obligations under
the proposed Rule, will also be deemed to have violated the proposed
Rule. Except for replacing ``his'' with ``it'' before ``obligations''
in the proposed Rule, proposed Rule 5310(d) is identical to Nasdaq PHLX
Rule General 9, Section 11(d).
Proposed paragraph (e) provides that the obligations in paragraphs
(a) through (d) of the proposed Rule exist where the
[[Page 733]]
member organization acts as agent for the account of its customer but
also where retail transactions are executed as principal and
contemporaneously offset. Except for replacing ``his'' with ``it''
before ``customer'' in the proposed Rule, proposed Rule 5310(d) is
identical to Nasdaq PHLX Rule General 9, Section 11(e).
Proposed Rule 5310 includes Supplementary Material based on Nasdaq
PHLX Rule General 9, Section 11(f) and one section based on FINRA Rule
5310.08 to provide additional guidance and clarity regarding the
obligations of member organizations and persons associated with member
organizations with respect to best execution requirements.
First, the Exchange would include an introductory paragraph that
provides that proposed Rule 5310(a) requires, among other things, that
a member organization or person associated with a member organization
comply with paragraph (a) when customer orders are routed to it from
another broker/dealer for execution, and that the proposed
Supplementary Material addresses certain interpretive questions
concerning the applicability of the best execution rule. The proposed
text is based on the first full paragraph of Nasdaq PHLX Rule General
9, Section 11(f) without change.
Proposed Supplementary Material .01 titled ``Definition of Market''
would define ``market'' and provides that the singular or plural term
should be construed broadly, and it encompasses a variety of different
venues, including, but not limited to, market centers that are trading
a particular security. Proposed Supplementary Material .01 further
provides that the expansive interpretation is meant to both inform
broker-dealers as to the breadth of the scope of venues that must be
considered in the furtherance of their best execution obligations and
to promote fair competition among broker-dealers, exchange markets, and
markets other than exchange markets, as well as any other venue that
may emerge, by not mandating that certain trading venues have less
relevance than others in the course of determining a firm's best
execution obligations. Proposed Supplementary Material .01 is based on
the second full paragraph of Nasdaq PHLX Rule General 9, Section 11(f)
without change.
Proposed Supplementary Material .02, titled ``Best Execution and
Executing Brokers,'' clarifies that a member organization's duty to
provide best execution in any transaction ``for or with a customer of
another broker-dealer'' does not apply in instances when another
broker-dealer is simply executing a customer order against the member
organization's quote or, stated in another manner, the duty to provide
best execution to customer orders received from other broker-dealers
arises only when an order is routed from the broker-dealer to the
member organization for the purpose of order handling and execution. As
proposed Supplementary Material .02 further provides, the clarification
is intended to draw a distinction between those situations in which the
member organization is acting solely as the buyer or seller in
connection with orders presented by a broker-dealer against the member
organization's quote, as opposed to those circumstances in which the
member organization is accepting order flow from another broker-dealer
for the purpose of facilitating the handling and execution of such
orders. Proposed Supplementary Material .02 is based on the third full
paragraph of Nasdaq PHLX Rule General 9, Section 11(f) without change.
Finally, Supplementary Material .03, titled ``Customer Instructions
Regarding Order Handling,'' would specify that if a member organization
receives an unsolicited instruction from a customer to route that
customer's order to a particular market for execution, the member
organization is not required to make a best execution determination
beyond the customer's specific instruction. However, member
organizations are still required to process that customer's order
promptly and in accordance with the terms of the order. Further, where
a customer has directed that an order be routed to another specific
broker-dealer that is also a member organization, the receiving broker-
dealer to which the order was directed would be required to meet the
requirements of proposed Rule 5310 with respect to its handling of the
order. Proposed Supplementary Material .03 is based on FINRA Rule
5310.08 without change except for conforming changes to reflect the
Exchange's membership.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\8\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\9\ in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system and, in general, to
protect investors and the public interest. In addition, the Exchange
believes that the proposed rule change is consistent with the Section
6(b)(5) \10\ requirement that the rules of an exchange not be designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ 15 U.S.C. 78f(b)(5).
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In particular, the Exchange believes that adopting best execution
and interpositioning standards based on Nasdaq PHLX Rule General 9,
Section 11 will promote just and equitable principles of trade and
protect investors and the public interest by imposing consistent order
execution standards that member organizations must observe when
handling customer orders that directly serve investor protection.
Moreover, the Exchange believes that incorporating the proposed
Supplementary Material containing additional guidance and clarification
of the obligations of member organizations and their associated persons
under the proposed Rule based on Nasdaq PHLX Rule General 9, Section 11
with an additional provision containing important clarifications about
the interaction between a broker-dealer's best execution obligations
and their obligations with respect to specific customer instructions
based on FINRA Rule 5310.08 will potentially enhance compliance with
those obligations, thus furthering the prevention of manipulative acts
and practices and the protection of investors and the public interest.
As discussed in the Purpose section, proposed Rule 5310 is
substantially similar to Nasdaq PHLX Rule General 9, Section 11, thus
promoting the application of consistent regulatory standards for
customer order execution across self-regulatory organizations. As such,
the proposed rule change would facilitate rule harmonization among
self-regulatory organizations with respect to customer order execution,
thereby fostering cooperation and coordination with persons engaged in
facilitating transactions in securities and will remove impediments to
and perfect the mechanism of a free and open market and a national
market system. In addition, the Exchange believes that the proposed
rule change will maintain the necessary protection of customer orders
designed to prevent fraudulent and manipulative acts, without imposing
any undue regulatory costs on industry participants. Finally, the
Exchange
[[Page 734]]
believes that the proposed rule change is not designed to permit unfair
discrimination between customers, issuers, brokers and dealers,
consistent with Section 6(b)(5) of the Act \11\ because the proposed
rule change will impose the same requirements on all member
organizations on an equal basis.
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\11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes the
proposed rule change will reduce the burdens on member organizations
that result from their having to comply with varying rules related to
best execution, thus reducing the complexity of customer order
protection rules, particularly for those member organizations subject
to the rules f multiple trading venues. Overall, the Exchange believes
the proposed rule change will enhance customer order handling rules by
harmonizing best execution and interpositioning standards across self-
regulatory organizations, which ultimately benefits market participants
and does not impose a burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
Because the proposed rule change does not: (i) significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\15\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\16\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#6311160f064e000c0e0e060d1710231006004d040c15"><span class="__cf_email__" data-cfemail="8efcfbe2eba3ede1e3e3ebe0fafdcefdebeda0e9e1f8">[email protected]</span></a>. Please include
file number SR-NYSE-2025-50 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NYSE-2025-50. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-NYSE-2025-50 and should be submitted on
or before January 29, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-00113 Filed 1-7-26; 8:45 am]
BILLING CODE 8011-01-P
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