The importance of good order execution
Order execution occurs when a buy or sell order is fulfilled, not when the trader places it. This means there is someone in the middle – a broker – who must determine the best way for the investor’s order to be executed on the market, and at what time.
Brokers are legally obligated to execute any order given to them in the best way possible, and many will have their own Order Execution Policies to outline their practices and commitments to their customers.
Brokers must obtain the best possible result when placing an order (buying or selling) on your behalf – they should never delay or stall your transaction. Bear in mind, however, that a ‘dealing desk’ broker may execute your trade by keeping it ‘in house’, not offsetting their exposure on your trade.
With a ‘no dealing desk’ broker such as Intertrader, the client sends an execution request, which is transmitted immediately to the liquidity provider which offers the best price on the relevant underlying instrument being traded. Liquidity providers are regularly re-assessed based on their quality and ability to execute.
Without the proper and immediate execution on your order, you could miss out on the buy/sell price that made you place the order in the first place.
Where are orders executed?
With Intertrader, your trading positions are automatically offset and passed straight through to the underlying market, with no dealer intervention and no requotes.
Through a constant comparison of the best liquidity providers, good online brokers will always try to ensure your order is executed in the most cost-efficient way, helping you get the transaction you want based on the advertised buy/sell prices.
The size of your order will determine if it can be filled within the underlying market or not. Brokers should never accept an order if they are unable to execute it.
In most cases, requests can be processed and executed immediately. Delayed order executions can happen if the underlying market lacks the required liquidity to fulfil the order.
Order execution requires the broker to have access to a reliable liquidity pool, which often benefits the trader due to the competition between liquidity providers.
Reliability of order execution is one of the main factors you should consider when choosing an online broker, as it means the price you see is more likely to be the price you get.
Published: 7 February 2019
You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.