According to FINRA, Interactive Brokers LLC was censured and fined $3.5 million for failing to meet best execution obligations under FINRA Rule 5310. The firm's reviews of customer execution quality were ad hoc, inadequately documented, and did not consistently include all relevant execution quality factors or regularly assess competing venues.

The firm failed to reasonably evaluate price improvement opportunities. When its own Alternative Trading System or two other market centers disseminated indications of interest at least $0.01 better than the National Best Bid or Offer, the firm routed orders to those venues without reasonably evaluating whether non-IOI venues might provide even better price improvement. The firm also adjusted its routing of non-marketable orders at month-end to receive volume-based rebate payments without assessing the impact on customer execution quality.

Additionally, Interactive Brokers routed approximately 10.4 million customer transactions through two broker-dealers engaged in net trading, interjecting intermediaries between the firm and the best market without adequately reviewing whether customers would have received better execution through direct routing. The firm's written procedures failed to describe how best execution reviews should be conducted or documented.

Best execution is a fundamental investor protection requiring firms to seek the most favorable terms reasonably available for customer orders. When firms prioritize their own rebate payments or fail to adequately assess execution quality, customers may receive worse prices than they should. This $3.5 million fine underscores the importance FINRA places on firms fulfilling their best execution obligations and maintaining rigorous, documented review processes.