The benefits of enhanced execution reporting quality for investors

Drivers of Execution Quality Reporting for Investors

• The SEC has adopted updates to Rule 605 to modernize transparency and help investors, and industry participants assess execution quality across brokers. Compliance is scheduled for August 1, 2026.
• Fidelity Capital Markets^® research details the key drivers of improving execution quality, underscoring the importance of transparency to improve outcomes for the industry and ensure the market structure continues to work for end investors.

Key Factors Driving Execution Quality

• Dealer competition: Greater competition narrows spreads and improves outcomes.
• Transparency: Public reporting and voluntary disclosures historically improved execution quality and reduced disparities across brokers.
• Order flow composition: Variability in retail order flow can affect realized spreads and execution outcomes.
• Industry costs: Factors such as order routing costs, connectivity, co-location, market data, and payment for order flow could affect prices dealers offer but were not a primary driver of execution quality.

New Rules Improve Best Execution Obligations

• Enhanced disclosures will strengthen the ability of advisors to evaluate whether broker-dealers meet their best execution obligations.

Updates Can Help to Illustrate When There Could be Portfolio-Level Implications for RIAs

• For RIAs managing large AUM or high-turnover strategies, poor execution can erode returns by 20–300 basis points annually. Advanced execution strategies can mitigate these costs.

Effective-to-Quoted Spread Ratio (E/Q) Is an Efficient Benchmark for the majority of retail trades

• E/Q is cited as a standardized metric for comparing execution quality across venues and brokers. Its normalization of price improvement makes it useful for comparing immediately executed orders. For advisors managing larger positions and AUM or higher turnover strategies where execution costs affect performance, more advanced execution strategies are necessary.