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Broker dealers have an affirmative obligation to obtain the best possible prices for clients. When customers are buying stock broker dealers must execute the customer’s order at the best ( lowest ) offer price available at the time. Alternatively, when customers are selling stock, the firm must execute the customer’s order at the best ( highest ) bid price available at the time. Provided the prices available meet any limit prices on the customer’s order. It is a violation of industry standards to execute a customer’s order at any price deemed to be inferior to the best price. The inside market for a stock consists of the Highest Bid and Lowest Offer displayed by any firm or in any market.. A broker dealer may never place a third party in between the customer and the best market. This is known as Interpositioning. The placing of another broker dealer in between the customer and the best marke.is prohibited unless it can be demonstrated that the customer received a better price because of it.. Here is an example of interpositioning.
A customer gives Broker an order to buy 3,000 shares of ABCD when the stock is quoted $3.75 X $4.25. Instead of buying the stock for their customer Broker A sends the order to Broker B who buys the stock at $4.10, Broker B then sells the stock to Broker A at $.4.15 and Broker A then sells the stock to the client at $4.25 plus a mark up. As a result both Broker A and B made money and the customer paid more than he / she should for the stock.