Definition of 'Execution'
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.
Investopedia explains '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.