Tastytradewas fined $850,000 by the Financial Industry Regulatory Authority (FINRA) forfailing to properly check whether its customers were getting the best availableprices on stock trades, the US brokerage regulator said. FINRAaccepted the settlement on Tuesday and censured the firm, closing a review thatspanned three years of order routing.At theheart of the case is a duty every US broker owes its clients, known as bestexecution, the obligation to seek the most favorable terms reasonably availablewhen filling an order. FINRA saidtastytrade, the Chicago options broker acquired by London-listed IG Groupin 2021, fell shortof that standard between January 2020 and January 2023.During thatperiod, the broker sent all of its customers' equity orders to five marketmakers, each of which paid the firm for the order flow. The arrangement itselfis legal and common. Theproblem, according to the settlement, was that tastytrade never compared theexecution quality it was getting against what its customers might have receivedat venues it did not use.Reviews That Stopped atthe Firm's Own Venuestastytrade'sbest-execution committee met quarterly, as the rules require. But FINRA saidthose meetings only looked at data from the five market makers already handlingthe firm's orders, and never at competing market centers.Theregulator also faulted the depth of the reviews. The committee relied onaggregate figures for total shares routed to each market maker, FINRA said, anddid not break orders down by type or track price disimprovement, cases where acustomer ends up with a worse price than the best quote available when theorder arrives.Under FINRArules, a firm that does not review orders one by one has to run "regularand rigorous" reviews instead, weighing its own fills against what rivalsoffer. FINRA saidtastytrade's supervisory system and written procedures were not built to dothat. The firm, formerly known as tastyworks, rebranded to tastytrade in early2023 and updatedthose procedures the same month, according to the settlement.A Familiar Charge for USRetail Brokerstastytradeis not the first retail broker FINRA has penalized over how it pairs paymentfor order flow with best execution. The regulator fined Robinhood $1.25 million inDecember 2019 forrouting customer orders to firms that paid for the flow without adequatelyreviewing execution quality, a case with clear echoes of this one.Others havelanded in the same place. FINRA hit E*Trade Securities with a$900,000 penaltyafter finding its best-execution committee lacked the data to properly judgethe quality it was giving customers. In 2022, Deutsche Bank Securities paid $2million to settlesimilar failings.Order Flow Still Pays atIGPayment fororder flow remains a live revenue line for tastytrade's owner. IG Group said inits most recent annual report that higher order-flowrates helped lifttastytrade's US derivatives revenue over the past year.Thepractice is banned in the United Kingdom and European Union, which is onereason IG has had to rethink how it charges for the options service it isrolling out under the tastytrade brand in Britain.Between2020 and 2022 alone, tastytrade routed more than 8.8 million equity orderscovering over 1.7 billion shares. The firm signed the settlement on June 26 andagreed not to dispute FINRA's findings. Representingit was Susan Schroeder of law firm WilmerHale, who ran FINRA's own enforcementdepartment from 2017 to 2019 before returning to private practice.This article was written by Damian Chmiel at www.financemagnates.com.