In what situation does the Three Contact Rule not apply?

The Three Contact Rule is a guideline for determining the best execution of a trade by requiring a broker to consider prices from at least three different sources to ensure fair pricing for customers. When there are at least two priced quotations available electronically, the rule typically applies because it is important to evaluate multiple price points in order to achieve the best execution.

However, when there is only one priced quotation available, the Three Contact Rule does not apply. In this situation, the broker has no choice but to execute the trade at that sole available price, as there are not enough data points to assess the market comprehensively. This indicates that without sufficient quotations, the evaluation process mandated by the rule is logistically impossible. Moreover, a high rating for the issuer or market instability may influence execution practices but does not change the fundamental requirement of having multiple price sources to apply the rule.