Best Execution

Abstract

“Best execution,” an obligation on equity market professionals that has been a holy grail in the United States since enactment of the Securities Acts Amendments of 1975, is a multifaceted concept that is difficult to define—and even more challenging to measure. The authors delineate the various measurement and implementation problems. They consider advice for the buy-side trader, implications for the providers of trading services, and caveats with regard to public policy. The best execution obligation in fact is shared across buy-side institutions, broker/dealer intermediaries, and the market centers themselves.