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Commitment to Execution Quality

Fidelity's Unique Approach
SEC Rule 605
SEC Rule 606

Fidelity's Unique Approach to Execution Quality

Fidelity has an internal order-flow management team whose purpose is to direct order flow to the best-performing market centers.

The order-flow management team uses both internal and external technology to generate reports that identify any order that executes outside the National Best Bid or Offer (NBBO).

To ensure our high standards are met, Fidelity's order-flow management team has established policies and procedures to:

Supervise order-flow routing activities
Define execution quality measures, which play a role in determining where orders are routed.
Monitor and evaluate competing market centers for order handling and execution quality
Identify and qualify orders executed outside the NBBO
Take corrective action for failure to meet our execution quality standards

Note: Execution Quality statistics were previously reported on a Trade basis and are now reported on a Share basis.

What Defines Execution Quality?	How Is it Measured?	Fidelity Statistics for Q3 2009
Execution Price	Shares executed at or within the National Best Bid or Offer (NBBO), which is a consolidated quote representing the highest bid and lowest offer for a security across all exchanges and/or market makers	% of shares that fall within the NBBO: 90.6% Details
Price Improvement	Percent of shares executed at prices better than the prevailing NBBO	% of shares that are price improved: 67.3% Details
Execution Speed	Elapsed time between the time Fidelity receives an order and the time of order execution	Average execution speed: 0.71 seconds Details
Effective Spread	Captures both how often, and by how much, a broker-dealer improves the price of a share	Average effective spread: $0.0172 Details

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SEC Rule 605

The SEC's customer disclosure rule, SEC Rule 605, requires market centers to disclose monthly data about the quality of their trade executions. Each monthly report will disclose execution-quality data based on the previous month's trading activity.

The reports for Fidelity's market centers can be accessed below.

Pursuant to the "Joint Industry Plan, Order Approving Plan Establishing Procedures Under Rule 605 by American Stock Exchange, Boston Stock Exchange, Chicago Stock Exchange, Cincinnati Stock Exchange, National Association of Securities Dealers, New York Stock Exchange, Pacific Exchange, and Philadelphia Stock Exchange" (Joint Industry Plan) the execution-quality data provided in the reports must be in a standard format.

Learn more about the SEC's Joint Industry Plan, which details reporting regulations. The Financial Industry Regulatory Authority (FINRA) has provided information about order disclosure and this rule. SEC Rule 605 monthly data can be accessed here.

Fidelity has also prepared execution quality measurement definitions to help you understand some of the terminology that is detailed in the reports above.

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SEC Rule 606

Under SEC Rule 606, broker-dealers that route orders on behalf of customers are required to prepare quarterly reports (PDF) that disclose the following information:

The percentage of total customer orders that were non-directed orders, and the percentages of total non-directed orders* that were market orders, limit orders, or other orders
The identity of the venues to which a significant percentage of total non-directed orders were routed for execution
The percentage of total non-directed orders routed to the venue, and the percentages of total non-directed market orders, non-directed limit orders, and non-directed other orders that were routed to the venue
Terms of the material aspects of the broker-dealer's relationship with each venue identified above, including a description of any arrangement for payment for order flow and any profit-sharing relationship

The reports are to be made public for each calendar quarter and published no later than one month after the end of the quarter. Another section of this rule requires annual public notification that this information is available.

Pursuant to the rule, customers can request details on the identity of the venue, time of execution, and whether the order was directed to a specific venue per customer request in the six months prior to the request. Through a Fidelity representative, a customer may also request up to six months of this information in hard copy on all orders for a specific time period and/or on individual securities. The collection period for this information began on July 2, 2001. This information is available online although it is not required by SEC rules.

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* Any order that the customer has not specifically instructed to be routed to a particular venue for execution.

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