Welcome to the Investors Trading Academy talking glossary of financial terms and events.
Our word of the day is “Best Execution”.

Best execution refers to the imperative that a broker, market maker, or other agent acting on behalf of an investor is obligated to execute the investor's order in a way that is most advantageous to the investor rather than the agent.
Let's assume you place an order to buy 100 shares of Company ABC stock. The current quote is $10 per share. Regardless of whether you place the order online or via phone, the broker can choose to send the order:
1. to a broker on the floor of a major exchange
2. to a broker on the floor of a regional exchange
3. to the stock's market maker
4. to a third market maker, which executes trades at publicly quoted prices
5. to an electronic communications network
6. to the broker's own firm, which might sell you the stock out of its own inventory
In our example, your broker might be able to send your order to an entity that is currently quoting $9.75 per share, which would save you $0.25. However, that entity might take longer to execute the trade than a third market maker might, because there are several orders ahead of you. The wait could actually result in a worse price, especially if the stock is volatile.
As the circumstances of each order and trading day vary, so does the determination of what best execution is.

By Barry Norman, Investors Trading Academy

свернуть