Execution

The step between an order and a position. An instruction leaves the platform, arrives somewhere that can act on it, is either accepted, rejected or partly satisfied, and a confirmation returns stating the price obtained and the moment it was obtained. Until that confirmation exists there is an instruction and no trade, however the screen looks.

What determines the outcome is the order type and the model the instrument runs under. An instruction to deal immediately takes whatever price is available when it arrives, so its price is not decided until then. An instruction with a price limit on it executes at that price or better, or not at all, which trades certainty of price for certainty of dealing. Under a market execution model an order is filled at the prevailing price without a further exchange of messages; under other models the price is confirmed back first, and a moved market produces a requote. Size interacts with depth: an order larger than the quantity resting at the best price is filled across several levels or in parts.

The word carries three meanings that get run together. It names the act described above. It also names a quality, assessed from measurements such as the proportion of orders filled, the time taken and the average difference between the price requested and the price obtained, which is slippage and runs in both directions. Finally it names a field on an instrument's specification stating which model applies. A firm's published execution policy sets out how it seeks a consistent result for clients, and that policy, rather than a headline speed figure, is what describes the arrangement.