Where Your Order Goes: Routing and Rule 606

The order does not go where you think

A retail customer taps “buy” and sees a fill. Between those two events the order is routed, and the routing decision is one of the least visible parts of the trade.

Most retail marketable orders in US equities do not execute on a public exchange. They execute at a wholesaler — a broker-dealer that fills customer orders from its own inventory or by matching them against other customer orders. That is legal, it is common, and it is disclosed, but the disclosures live in documents almost nobody reads.

Two rule numbers organise those documents. Rule 606 is the broker’s routing report. Rule 605 is the venue’s execution-quality report. They answer different questions about the same order.

Rule 606: what the broker must publish

The rule’s first paragraph sets the obligation: “Every broker or dealer shall make publicly available for each calendar quarter a report on its routing of non-directed orders in NMS stocks that are submitted on a held basis and of non-directed orders that are customer orders in NMS securities that are option contracts.”

Three words in that sentence do most of the work:

• Non-directed — the customer did not specify the venue. Most retail app orders are non-directed.
• Held basis — the broker holds the order rather than delivering it immediately to another broker’s desk.
• NMS stocks and option contracts — the report covers the securities the rule names, not every product a firm offers.

The report must then be detailed in a specific way. For each venue it must state the “net aggregate amount of any payment for order flow received, payment from any profit-sharing relationship received, transaction fees paid, and transaction rebates received, both as a total dollar amount and per share”, broken out by order type: market orders, marketable limit orders, non-marketable limit orders, and other orders.

That is a stronger disclosure than a headline number. A broker cannot report only the total received; it must break the amount down by order type and per share, which is what makes it possible to compare one order category against another.

The rule also requires “a discussion of the material aspects of the broker’s or dealer’s relationship with each venue identified”, including “a description of any arrangement for payment for order flow and any profit-sharing relationship”. The quantified table and the written description are meant to be read together: the table says how much, the text says on what terms.

The report must be posted on an internet site that is free and readily accessible, and kept there for three years from the date it was first posted.

Rule 605: the venue’s own numbers

Rule 605 measures the other end of the pipe. Every market centre must make available, each calendar month, “a report on the covered orders in NMS stocks that it received for execution from any person”, “categorized by security, order type, and order size”.

The columns are operational: the number of covered orders, the shares received, the shares cancelled prior to execution, the shares executed at the receiving market centre, the shares executed elsewhere, and the shares executed in defined time bands after receipt.

The value of the report is that it is standardised. A wholesaler’s price improvement statistics can be compared with an exchange’s on the same dimensions, because both are reporting against the same columns. The limitation is equally important: the report describes the venue’s aggregate handling of all orders it received. It says nothing about the order that was routed away from it, and nothing about the price a specific customer would have achieved in a different venue.

What best execution asks for

The obligation on the broker sits in FINRA Rule 5310. A firm must “use reasonable diligence to ascertain the best market for the subject security”, and trade there so that “the resultant price to the customer is as favorable as possible under prevailing market conditions.”

That is a process obligation, not a price promise. The rule’s supplementary material makes the process concrete: firms must conduct “regular and rigorous” reviews of their routing, at least quarterly, comparing current arrangements with competing markets and considering, among other things:

If material differences in execution quality exist, the firm must change its routing or explain why it has not.

The last row is the one that matters for a reader who is trying to understand the incentive. The rule does not ban payment for order flow. It requires the firm to look at execution quality with the arrangement in front of it, and to document the comparison.

Why internalisation happens at all

A wholesaler that fills a retail order takes the other side of it. The economics are straightforward: retail order flow is comparatively uninformed — it is not usually trading on a short-lived information edge — so the risk of taking the other side is lower than it is against a professional counterparty. That is why wholesalers can pay for the flow and still expect to profit.

For the customer, the arrangement has two effects that pull in opposite directions. On one side, a wholesaler can fill at a price inside the public spread, producing price improvement that would not have existed on the exchange. On the other, the order never reaches the public book, so it never contributes to the depth that other participants see.

Neither effect is a scandal. The question the disclosures are meant to answer is whether the first effect is being delivered consistently, and whether the routing was chosen because of it rather than because of the payment.

How to read the reports without over-reading them

1. Find the broker’s Rule 606 report and look at the venue concentration. A small number of venues receiving most of the flow is normal; the report says which ones and on what terms.
2. Compare the per-share payment across order types. The breakdown exists so that a market order and a non-marketable limit order are not averaged into one number.
3. Read the venue’s Rule 605 report for price improvement and execution speed on the same order categories.
4. Do not compare averages to your own fill. The reports are aggregates across all customers and all order sizes; your order is one sample inside them.

What the reports cannot tell you is whether a different route would have filled your specific order at a better price. That counterfactual does not exist in any published dataset.

The comparison worth making with a crypto venue

A crypto exchange is usually both the broker and the venue. The order does not get routed anywhere; it enters the venue’s own book, and the fee schedule charges the customer directly. There is no payment for order flow in the US equity sense, because there is no third-party router to pay.

What replaces it is the fee schedule and the venue’s own matching rules — maker and taker rates, tier thresholds, and the priority rules that decide who fills first. The disclosures are different in kind: a fee table and a rulebook rather than a routing report.

Neither structure is inherently better for a customer. The US arrangement puts a disclosure obligation between the broker and the venue; the crypto arrangement removes the intermediary and puts the venue’s own published rules in its place. What matters in both cases is the same: knowing who is on the other side, what they are paid, and what the fill was measured against.

Risk note. The Rule 606 and Rule 605 requirements, and the best-execution obligation, in this article were read from the published CFR text and FINRA Rule 5310 on 2026-10-27. Rule text and firm practices change; read the current rule and the firm’s own reports before relying on a conclusion. Nothing here is investment advice.