TRADE EXECUTION QUALITY
Per FINRA Notice 15-46, “[a] broker-dealer duty of best execution has been codified in FINRA’s best execution rule, Rule 5310. This rule provides that, “in any transaction for or with a customer or customer of another broker-dealer, a member and persons associated with a member 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 rule governs both transactions where the firm acts as agent for the account of its customer, and where transactions are executed as principal.
Per Rule 5310, the determination as to whether a firm exercised reasonable diligence to ascertain the best market for the security and bought or sold in that market so that the resultant price to the customer is as favorable as possible under prevailing market conditions necessarily involves a “facts and circumstances” analysis. In addition, a firm must make every effort to execute a marketable customer order that it receives fully and promptly.
Orders Sent Near the Opening of Trading: Please note that markets can be especially volatile near the opening of a trading session, with prices and available volume often changing rapidly and with data feeds from various markets potentially being slow or temporarily unavailable. Longbridge cannot guarantee that orders sent at or near the opening of trading will necessarily receive the best posted price. You may want to consider the use of limit orders at the open, although market orders should be used if certainty of getting a fill is of greater concern to you than fill price.
Important Characteristics and Risks of Using Stop Orders: A Stop Order (i.e., a Stop Market Order) is an instruction to buy or sell at the market price once your trigger (“Stop”) price is reached. Please note that a Stop Order is not guaranteed a specific execution price and may execute significantly away from its stop price, especially in volatile and/or illiquid markets. Stop Orders may be triggered by a sharp move in price that might be temporary. If your Stop Order is triggered under these circumstances, you may buy or sell at an undesirable price. Sell Stop Orders may make price declines worse during times of extreme volatility. If triggered during a sharp price decline, a Sell Stop Order also is more likely to result in an execution well below the stop price. Placing a limit price on a Stop Order may help manage some of these risks.
A Stop Order with a limit price (a Stop Limit Order) becomes a limit order when the instrument reaches the stop price. By using a Stop (Limit) Order instead of a regular Stop Order, you will receive more certainty regarding the execution price, but there is the possibility that your order will not be executed at all if your limit price is not available in the market when the order is triggered.
Important Characteristics and Risks of Using Market Orders: Please note that a Market Order is an instruction to execute your order at the current price available in the market. A Market Order is not guaranteed a specific execution price and may be executed at an undesirable price. If you would like greater control over the execution prices you receive, consider submitting your order using a Limit Order, which is an instruction to execute your order at or better than the specified limit price.
ORDER ROUTING INFORMATION
Pursuant to federal securities regulation, firms are required to make publicly available a quarterly report with regard to its routing of non-directed orders. For the purpose of this Rule, we have entered into an agreement with Apex Clearing Corporation (“Apex”) to route orders on behalf of Long Bridge Securities LLC (“Longbridge”). This includes stock, ETF, and option trading. Apex’s order routing numbers can be accessed by utilizing the following link: https://www.apexclearing.com/disclosures.
SEC Rule 606(b) also requires broker-dealers to disclose to its customers, upon request, “the identity of the venue to which the customer’s orders were routed for execution in the six months prior to the request, whether the orders were directed orders or non-directed orders, and the time of the transactions, if any, that resulted from such orders.”
U.S. Securities and Exchange Commission rules require all brokerage firms to make publicly available quarterly reports describing their order routing practices. Longbridge quarterly order routing reports are available on the FINRA website at finra.org/finra-data/606-nms-data. In addition to the basic quarterly reports, under Rule 606 of SEC Regulation NMS, a broker-dealer is required upon a client request to provide information regarding the identity of the market center to which the client’s orders were routed in the six months prior to the request; whether the order was a directed or non-directed order, and the time of the transaction, if any, that resulted from such order. Please contact support@longbridge.com if you wish to receive the foregoing routing information for any order(s) within the past six months. Please type “Request for Order Routing Information” in the subject line of your request and please include your name, user id and account number as well as the date of the order, the security, the quantity, and any other information necessary to identify the order (e.g., the time of day if there were several similar orders that day.)
PAYMENT FOR ORDER FLOW DISCLOSURE
Pursuant to SEC Rule 607, Longbridge is required to disclose its Payment for Order Flow (“PFOF”) practices. Longbridge maintains all customer accounts on a fully disclosed basis with its clearing firm, Apex. Longbridge sends all equity and options orders to Apex for routing and execution. Apex sends orders (on our behalf) to exchanges, electronic communication networks, or broker-dealers during normal business hours and during extended trading sessions. When these market centers or exchanges provide PFOF to Apex, Apex will share a portion of the payment received for these orders with Longbridge.
The portion of PFOF shared by Apex with Longbridge for the trading of stocks and ETFs, which is currently 50% of the amount Apex received for Longbridge customer orders, may change or fluctuate from time to time. The details of these payments and fees are available upon written request. Execution venues might also charge access fees or provide exchange rebates depending upon the characteristics of the order and any subsequent execution.
Longbridge also receives payments from Apex for option order flow directed to certain option exchanges and broker dealers by customers. Compensation is generally in the form of a per-option contract payment. Apex shares a portion of these payments with Longbridge. The portion of PFOF shared by Apex with Longbridge for options trading, which is currently 85% of the amount Apex received for Longbridge customer orders, may change or fluctuate from time to time. The details of these payments and fees are available upon written request.
Order routing decisions are based on several factors including the size of the order, the opportunity for price improvement and the quality of order executions. We regularly review Apex’s execution quality to ensure that it meets our duty of best execution.