FINRA Rule 5320 – Customer Order Protection
On September 12, 2011, FINRA Rule 5320 took effect. The rule was adopted to consolidate and simplify existing rules NYSE Rule 92, NASD IM-2110-2 and NASD Rule 2111.
While FINRA Rule 5320 generally prohibits Firm principal orders from trading ahead of customer order flow, RBC may execute for a principal account, from time-to-time, at prices that would satisfy institutional customer order flow. Rule 5320 provides a “no knowledge” exemption, which permits a firm to trade for its own account in certain securities provided that the trading unit does not have knowledge of client orders that would trigger restrictions under the Rule. These principal account executions are typically executed in relation with market-making activity, and may include trading activity in connection with capital commitment, bona-fide hedging activities, and error trades. Furthermore, principal orders entered into the Firm's trading algorithms may receive executions in front of, or alongside of, customer order flow for reasons unrelated to order capacity, such as: time/price order priority, order aggressiveness, strategy selection, and other order restrictions.
In the event your firm has questions or objects to any of these order handling practices, please contact your RBC Sales Coverage for additional information. Your firm may instruct RBC not to trade at prices that would otherwise satisfy an open marketable customer order without order-by-order consent.
Additionally, the Firm utilizes a system of information barriers to prevent the flow of information between separate and distinct trading units. The Firm’s information barriers may allow the Firm’s market-making desk to trade principally at prices that would otherwise satisfy an open, marketable customer order.
You may instruct the Firm not to trade at prices that would otherwise satisfy an open, marketable customer order without order-by-order consent. In the event that you have questions or object to any of these order handling practices, please contact your sales coverage.