All broker-dealers are required by the Securities and Exchange Commission to make an annual disclosure to customers on payment for order flow received from market centers and regional exchanges to which the broker-dealer routes orders for execution. We have attempted to provide you the necessary details to understand the process and the extent to which your firm goes in employing the most customer-advantageous execution methods available.
FIG Partners, LLC does not receive payment for routing certain orders in equity securities to specialized market maker firms and alternative market centers for execution. However, our clearing firm, First Clearing Corp., does receive payment for order flow. At times, orders that FIG does not make a market in are traditionally entered into FCC’s order system. Orders for securities entered at the market or at limit prices which are close enough to the current market to be executed immediately are generally eligible for such payments. Other types of orders generally are not eligible for such payments.
In the absence of specific instructions from customers, First Clearing Corp. and its affiliates generally direct orders for certain securities to these firms regardless of whether a particular order qualifies for such payment as described above. However, orders normally directed to a specialized market maker or alternative market center may be re-routed because of market conditions, e.g. the size of the market (number of buyers and sellers) or the spread (the difference between the current bid and current offer) in each market center, and the volatility of the stock (fast market) at the time the order is entered. Extraordinary market activity (heavy volume, fast market, market downturn) or equipment failure may also be a factor in the determination of order routing.
First Clearing Corp. and affiliates believe that our order-routing policies offer significant benefits to our customers because of practices engaged in by specialized market maker firms and alternative market centers. First, these firms “stop out” (protect) orders at the National Best Bid or Offer (NBBO) and attempt to obtain a better price by exposing these orders in other markets through their automated quotation systems. Second, these firms handle a significant portion of the smaller-sized orders for many securities and can match up limit orders received from a diverse customer base, which increases the opportunity for limit order execution. Third, the advanced technology employed by these firms permits very rapid order execution and timely reporting. Finally, some of these firms may base their executions on prices printed for block trades and cross trades as well as for ordinary trades, increasing the opportunity for rapid executions.
First Clearing Corp. and affiliates will gladly provide specific information (i. e. whether or not payment for order flow was received, the source of such payment, and the amount of such payment) about any particular transaction in your account upon your written request.