The Law and Economics of Best Execution

In the Journal of Financial Intermediation, Vol. 6, No. 3 (1997).

Posted: 8 Oct 1997

See all articles by Maureen O'Hara

Maureen O'Hara

Cornell University - Samuel Curtis Johnson Graduate School of Management

Jonathan R. Macey

Yale Law School

Abstract

This paper reviews and analyzes the legal and economic aspects of the duty of best execution. Although a well-established principle of securities trading, we show that the dual problems of definition and enforcement make best execution both unwieldy and unworkable as a mandated legal duty. We examine the impact of several market practices on best execution, in particular payment for order flow, preferencing and internalization practices, and price improvement and order execution protocols. We suggest three possible directions for the future rule and interpretation of the duty of best execution.

JEL Classification: G10, G18, K22, K23

Suggested Citation

O'Hara, Maureen and Macey, Jonathan R., The Law and Economics of Best Execution. In the Journal of Financial Intermediation, Vol. 6, No. 3 (1997).. Available at SSRN: https://ssrn.com/abstract=43401

Maureen O'Hara (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-255-3645 (Phone)
607-255-5993 (Fax)

Jonathan R. Macey

Yale Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States
+203-432-7913 (Phone)
+203-4871 (Fax)

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