Execution

What is an 'Execution'

An execution is the completion of a buy or sell order for a security. The execution of an order happens when it is completely filled, not when it is placed by the investor. When the investor places the trade, it goes to a broker, who then determines the best way for it to be executed.

BREAKING DOWN 'Execution'

Brokers are required by law to give investors the best execution possible, and can attempt to execute the transaction in the following ways:

1. Order to the Floor: This can take some time as it goes through human hands. The floor broker will need to get the order and fill it.
2. Order to Market Maker: On exchanges such as the Nasdaq, market makers are in charge of different stocks. The investor's broker may direct the trade to one of these market makers for execution.
3. Electronic Communications Network (ECN): An extremely quick method, whereby computer systems electronically match up buy and sell orders.
4. Internalization: If the broker's firm holds an inventory of the stock in question, it may decide to execute the order from its own inventory.

RELATED TERMS
  1. Executing Broker

    The broker or dealer that finalizes and processes an order on ...
  2. Order

    An investor's instructions to a broker or brokerage firm to purchase ...
  3. Market Order

    An order that an investor makes through a broker or brokerage ...
  4. Give Up

    A procedure in securities or commodities trading where the executing ...
  5. Two Dollar Broker

    A floor broker who executes orders for other brokers who cannot ...
  6. Firm Order

    1. A market order to buy or sell a security for a brokerage's ...
Related Articles
  1. Trading Strategies

    Introduction To Order Types: Market Orders

    Note: Use a market order to guarantee a fill. A market order is the fastest and most reliable way to get in out of a trade. A market order is appropriate if getting filled is more important than ...
  2. Online Stock Traders

    Online stock traders place buy/sell orders for financial securities and/or currencies with the use of a brokerage's Internet-based proprietary trading platforms. The use of online trading ...
  3. Professionals

    Is The Series 24 Exam Hard?

    What makes the series 24 so challenging? The exam focuses very heavily on the supervision of trading and market making and the supervision of investment banking.
  4. Trading Systems & Software

    Creating Automated Trading Systems Using Interactive Brokers: Introduction

    Interactive Brokers Group, Inc., known by traders as "IB," is an automated global electronic market maker and broker specializing in routing orders and executing and processing trades on more ...
  5. Retirement

    Electronic Trading: Electronic Communications Networks (ECNs)

    An electronic communication network (ECN) is an electronic system that attempts to facilitate (for market makers) or eliminate (for individual investors) third party orders entered by a client's ...
  6. Forex Education

    Market Makers Vs. Electronic Communications Networks

    Learn the pros and cons of trading forex through these two types of brokers.
  7. Investing

    How To Start Trading: Order Types

    The types of orders you use can have a large effect on your trading performance, so understanding the different order types is important to your success.
  8. Investing Basics

    Understanding Immediate-or-Cancel Orders

    A trader places an immediate-or-cancel order to immediately execute a trade in full or in part. Any part of the order that remains unfulfilled is canceled.
  9. Retirement

    Choosing A Compatible Broker

    We go over the factors that determine different investing personalities, and the services that best suit them.
  10. Forex

    How Forex Brokers Make Money

    Forex brokers set their prices based on commission, spread, or a combination of both. Traders have to be cautious in the thinly regulated forex market.
RELATED FAQS
  1. How do financial advisors execute trades?

    Understand how financial advisors normally execute an investor's trades. Learn about the different type of markets and exchanges ... Read Answer >>
  2. What's the difference between a market order and a limit order?

    Buy and sell trades with market orders at the present stock price and execute limit orders if the stock price falls within ... Read Answer >>
  3. How do I place an order to buy or sell shares?

    Read a brief overview of how to open a brokerage account, how to buy and sell stock, and the different kinds of trade orders ... Read Answer >>
  4. What is the difference between a stop and a market order?

    Learn about market orders and stop orders, how they are used and executed, and the main difference between stop orders and ... Read Answer >>
  5. What are the regulations surrounding limit order protection?

    Learn about the order protection rule enacted by the Securities and Exchange Commission (SEC) to ensure investors receive ... Read Answer >>
  6. What is the difference between a broker and a market maker?

    A broker is an intermediary who has a license to buy and sell securities on a client's behalf. Stockbrokers coordinate contracts ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center