Finra Launches Probe of Retail Broker Routing Practices

WASHINGTON—The Financial Industry Regulatory Authority is pressing retail brokers for details about how they route customer orders amid mounting concerns some brokers might be sending orders to venues that provide the highest payments but not the best price for investors. Finra is sending “sweep letters” to about 10 brokers this week after studying routing patterns by the firms on its Order Audit Trail System, which tracks stock-market trading action, said Tom Gira, executive vice president of Finra’s market regulation department, in an interview. Mr. Gira said Finra has notified the firms that they’ll be receiving the letter. The letter asks brokers for information about how they determine where to route orders so that the price is “as favorable as possible for its customer under prevailing market conditions,” based on a copy of the letter posted on Finra’s website. Finra is focusing on so-called nonmarketable limit orders, or orders that will only trade if a stock reaches a specific price. Retail brokers often route such orders to exchanges, giving them the opportunity to collect a rebate exchanges offer. More in the Wall Street Journal here.