Execution

Execution is when a broker completes the buy or sell order the trader has requested. A buy or sell order is executed once it is filled out, rather than when it is placed by the trader. 

For instance, an investor places an order to sell 50 shares of a certain stock for £200. After they submit the order, their respective stockbroker enters the market to execute that order at the best possible selling price. If, for example, the best possible price to sell those shares at that moment is £205, the order will get filled at that level. 

There are multiple ways brokers can execute an order. These include sending the order to one of the major stock exchanges, market makers, electronic communications network (ECN), or through an inventory of securities. The specific regulation forces brokers to identify the best possible means to execute a trade on behalf of their clients.

A number of investors do not understand that they are not directly connected to the market but knowing how their orders are executed and who handles their money can give them additional comfort. It is especially important to know your broker’s execution options if you are a day trader as time and price in day trading are crucial. 

Go back to our full glossary.