What is 'Execution-Only'

Execution-only is a trading service that is restricted to only the execution of trades, without the client receiving any advice about the merits or risks of the investments or their suitability. Execution-only services are predominantly internet-based or telephone-based. Since no advice is provided to customers, execution-only services are most suitable for experienced investors who are aware of the risks and rewards of various types of investments.

As these firms only offer trade execution, improvements in trading platform technology have led to plummeting costs for such services. For retail investors, these execution-only services offer a very economical trading platform, and many of them offer stock trades for single-digit dollar commissions.

BREAKING DOWN 'Execution-Only'

In order to operate more efficiently, execution-only services use nominee accounts. This means that the client's investments are registered in the name of the brokerage that operates the execution-only service, although the client remains the beneficial owner. While the brokerage handles all the documentation related to the buying and selling of securities, as well as collecting dividends and depositing them in the client's account, it will also forward information that needs shareholder action directly to the client.

Research Offered by Execution-Only Services

Although they do not provide advice or recommendations, many execution-only services make investment research from their parent companies available to their clients. So while these clients ultimately have to make the investment decision on their own, they receive a wealth of information such as real-time market data, trading ideas, and analysis of trends to assist them in the decision-making process.

The brokerage executing the trade will not have an opinion on whether a trade should be executed, so leveraging an execution-only firm places an additional layer of risk on each trader or investor.

Cost of Execution-Only Services

The cost of execution-only services is a fraction of what it costs for putting through a trade at a full-service brokerage or even most discount brokers. It is therefore primarily suitable for experienced traders, day traders and technical traders who may make numerous trades on any given day. However, traders should be aware of the risks of over-trading, which can lead to potentially steep losses that more than offset the low cost of trading through an execution-only service.

Using these services, investors can execute trades on many different types of securities including stocks, bonds, mutual funds, exchange-traded funds (ETFs) and foreign exchange.

  1. Account Executive

    An account executive is a person who has primary responsibility ...
  2. Full-Service Broker

    A full-service broker is a broker that provides a large variety ...
  3. Deep Discount Broker

    A deep discount broker mediates sales and exchanges between securities ...
  4. Discretionary Account

    A discretionary account is an investment account that allows ...
  5. Investment Advice

    Investment advice is any advice that provides guidance, for a ...
  6. Best Execution

    Best execution is a legal mandate that dictates brokers must ...
Related Articles
  1. Trading

    What Apple's Earnings Win Means for Its Stock Today

    Expect a big open for Apple stock, and keep an eye on momentum.
  2. Trading

    Can Amazon Earnings Push Shares Back Above $1,000?

    Amazon's earnings release tonight could determine the near-term direction of the shares.
  3. Financial Advisor

    Manage Your Clients' Expectations

    You can't control how they react to the market, but you can help them understand the reality of the situation.
  4. Managing Wealth

    Asset Manager Ethics: Acting In the Benefit of Clients

    Investment managers should always act to benefit the client. Learn what actions managers should take on a client's behalf.
  5. Trading

    Apple and Cisco Stocks: A Reversal of Fortune

    The diverging paths of Apple and Cisco stocks highlights changing capital flows within the tech sector.
  6. Financial Advisor

    What Is Your Client's Willingness and Ability to Take Risk?

    Financial advisors must carefully consider a client's willingness and ability to take investment risks, including tax concerns and liquidity needs.
  7. Tech

    Advisors Need to Talk Less, Ask and Listen More

    Financial advisors spend a lot of time giving their clients advice on how to invest their money. But what they often forget to do is listen.
  8. Tech

    Advisors: How and Why to Justify Your Fees

    In an era of fee compression here's how financial advisors can justify what they charge clients.
  9. IPF - Broker

    The Complete Guide to Choosing an Online Stock Broker

    Online stock brokers have made high-risk, high-reward investing available to the broader public.
  10. Investing

    Full-Service Brokerage or DIY?

    Determine what you are getting for your fees and commissions and whether to use a broker or do it yourself.
Trading Center