FINRA Fines tastytrade $850,000 Over Best Execution Failures | LeapRate
FINRA said this week that it has censured and fined tastytrade, Inc. $850,000 after finding the online brokerage failed to properly review whether its customers received the best possible execution on equities orders over a three-year period.
According to a Letter of Acceptance, Waiver, and Consent released by FINRA, tastytrade routed all customer equity orders exclusively to five market makers between January 2020 and January 2023. All five paid the firm for that order flow.
During this window, the Chicago-based broker is said to have directed more than 8.8 million equity orders, totaling over 1.7 billion executed shares, without comparing execution quality against competing market centers it did not use.
FINRA found that tastytrade’s best execution committee met quarterly but only assessed data from its existing five market maker partners, never benchmarking that performance against alternative venues.
The firm’s reviews also relied on aggregated data rather than breaking down results by order type, and did not account for price disimprovement, a key metric under FINRA Rule 5310.09.
As a result, regulators concluded tastytrade violated FINRA Rules 5310(a), 5310.09, and 2010, which govern best execution and standards of commercial conduct.
FINRA also found the firm’s supervisory procedures, including its written supervisory procedures, were not reasonably designed to ensure compliance with best execution requirements, breaching Rules 3110 and 2010.
tastytrade, formerly known as tastyworks before its 2023 rebrand, neither admitted nor denied the findings but consented to the sanctions. The firm has since overhauled its supervisory systems and procedures, addressing the deficiencies identified by regulators, according to the settlement documentation.
