Executing Broker Agreement for the United States

Executing Broker Agreement Template for United States

An Executing Broker Agreement is a legally binding contract governed by U.S. federal securities laws and FINRA regulations, establishing the terms under which a broker-dealer provides trade execution services to clients. The agreement details execution obligations, compliance requirements, fee structures, and risk management procedures, while ensuring adherence to SEC regulations and applicable state securities laws.

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What is a Executing Broker Agreement?

The Executing Broker Agreement serves as the foundational document for establishing and governing the relationship between executing brokers and their clients in the U.S. securities markets. This contract type is essential for institutional trading relationships, detailing crucial aspects such as execution services, compliance obligations, fee structures, and risk management procedures. It ensures compliance with SEC regulations, FINRA rules, and applicable state laws while providing clear guidelines for trade execution, reporting, and settlement processes.

What sections should be included in a Executing Broker Agreement?

1. Parties: Identification of executing broker and client, including registration details and legal status

2. Background: Context of the agreement and brief description of the services to be provided

3. Definitions: Key terms used throughout the agreement

4. Services: Detailed description of execution services to be provided

5. Duties and Obligations: Responsibilities of both parties including best execution, reporting, and compliance requirements

6. Fees and Compensation: Commission structure and payment terms

7. Representations and Warranties: Legal statements about parties' capacity, authority, and compliance status

8. Term and Termination: Duration of agreement and conditions for termination

9. Confidentiality: Protection of confidential information and trade secrets

10. Governing Law: Applicable law and jurisdiction

What sections are optional to include in a Executing Broker Agreement?

1. Prime Brokerage Arrangements: Additional terms and conditions for when executing broker works with prime brokers

2. DMA Services: Specific provisions and requirements for Direct Market Access services

3. Algorithm Trading: Terms and conditions governing the use of algorithmic trading capabilities

4. Cross-Border Provisions: Additional terms and requirements for international trading across multiple jurisdictions

5. Give-Up Arrangements: Terms and conditions governing give-up trading arrangements

What schedules should be included in a Executing Broker Agreement?

1. Fee Schedule: Detailed commission rates and fee structure

2. Markets Schedule: List of markets where execution services are provided

3. Authorized Persons: List of individuals authorized to give trading instructions

4. Order Execution Policy: Detailed policy for best execution requirements

5. Risk Disclosure: Required risk disclosures and acknowledgments

6. Technology Requirements: Technical specifications for electronic trading systems

7. Compliance Requirements: Detailed regulatory compliance procedures

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Cost

Free to use

Relevant legal definitions

Clauses

Relevant Industries

Financial Services
Investment Management
Securities Trading
Hedge Funds

Relevant Teams

Legal
Compliance
Trading
Operations
Risk Management

Relevant Roles

Head of Trading
Chief Compliance Officer
Legal Counsel
Portfolio Manager
Operations Director
Trading Manager
Compliance Manager
Risk Officer

Industries

Securities Exchange Act of 1934: Primary federal legislation governing securities trading, broker-dealers, and securities exchanges in the United States

Securities Act of 1933: Federal law governing the initial offering and sale of securities, requiring registration and disclosure requirements

Investment Advisers Act of 1940: Federal law regulating investment advisers and their responsibilities to clients

Investment Company Act of 1940: Federal law regulating investment companies and mutual funds

FINRA Rule 2111: Suitability requirements for broker-dealers when recommending securities transactions

FINRA Rule 5310: Best Execution requirements ensuring clients receive the most favorable terms for their trades

FINRA Rule 2210: Requirements for communications with the public, including advertising and marketing materials

FINRA Rule 4511: Books and Records requirements for maintaining accurate and complete transaction records

Regulation NMS: SEC rules governing the National Market System and order execution requirements

SEC Rule 15c3-1: Net Capital Requirements for broker-dealers to maintain adequate financial resources

SEC Rules 17a-3 and 17a-4: Record Keeping Requirements specifying which records must be maintained and for how long

Bank Secrecy Act: Requirements for financial institutions to assist government agencies in detecting and preventing money laundering

USA PATRIOT Act: Anti-terrorism law including provisions for enhanced scrutiny of financial transactions and customer identification

Gramm-Leach-Bliley Act: Federal law requiring financial institutions to explain their information-sharing practices and protect sensitive data

Regulation SCI: Systems Compliance and Integrity requirements for technology infrastructure of trading systems

Blue Sky Laws: State-specific securities laws governing securities transactions within individual states

Commodity Exchange Act: Federal regulation of commodity futures and options markets, relevant if dealing with commodities

Dodd-Frank Act: Comprehensive financial reform legislation including provisions for systemic risk, derivatives, and consumer protection

Uniform Commercial Code: Standardized state laws governing commercial transactions, including securities transactions

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What is a Executing Broker Agreement?

What sections should be included in a Executing Broker Agreement?

What sections are optional to include in a Executing Broker Agreement?

What schedules should be included in a Executing Broker Agreement?

Authors

Alex Denne

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