Best Paper - Volume 6

The JFI editors are pleased to announce that the JFI Best Paper Prize for the most significant paper published in the 1997 Journal of Financial Intermediation has gone to Jonathan R. Macey and Maureen O'Hara for their paper, "The Law and Economics of Best Execution," published in Volume 6, Issue 3. The prize carries with it a $2,500 check for the winners.

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The Law and Economics of Best Execution
Jonathan R. Macey and Maureen O'Hara
Cornell University, Ithaca, New York 14853

Abstract

This paper reviews and analyzes the legal and economic aspects of the duty of best execution. Although a well-established principle of securities trading, we show that the dual problems of definition and enforcement make best execution both unwieldy and unworkable as a mandated legal duty. We examine the impact of several market practices on best execution, in particular payment for order flow, preferencing and internalization practices, and price improvement and order execution protocols. We suggest three possible directions for the future rule and interpretation of the duty of best execution.Journal of Economic LiteratureClassification Numbers: G10, G18, K22, K23. ©1997 Academic Press, Inc.