Order routing

Between the click and the fill an order has to reach somewhere that will deal with it, and there are three broad destinations. It can be internalised, matched against the firm's own book or against another client's opposite interest. It can be passed to one or more liquidity providers through an aggregator that ranks their quotes. Or it can be sent to an exchange, where it joins a central order book. The route decides who ends up as counterparty and which prices were available to the order at all.

Regulated firms route under a best execution obligation. In practice that means a written execution policy naming the factors weighed, conventionally price, cost, speed, likelihood of execution and settlement, and size, together with their relative importance for a retail client, published and reviewed on a stated cycle. Several mechanics sit underneath it and shape the result: how many providers are aggregated, whether any of them apply last look to a quote before accepting the trade, and whether price improvement found on the way is passed on or retained.

Routing is invisible on a ticket, which reports the fill and not the path, so it is assessed from disclosure and from execution statistics rather than from any single trade. How comparable those statistics are across firms is genuinely disputed, because methodologies and instrument mixes differ enough that two honest reports need not measure the same thing. Internalisation is likewise not automatically adverse: it can produce a faster fill and a better price than an external venue would, while also placing the firm on the other side of a client's result, and both of those are true at once.