Trade execution is often misunderstood. As is commonly believed, it doesn’t refer to when an individual order is placed to buy or sell a security. Trade execution does, in fact, refer to the completion of that order. 

When an investor submits the order, it’s sent to a broker, who will then determine the best way to execute it. A trade may be executed in many different ways, with digital methods increasingly coming to the fore.

Understanding trade execution

Brokers work in a regulated environment, which means they are required to give investors the best execution service possible. With the widespread adoption of technology, the cost of executing trades has reduced, and different markets have become more accessible to a wider variety of investors. 

Whether an investor places a trade online or over the phone, the order will go initially to the broker. The broker will then look at the size and the availability of the order and decide which route is the best to take for that particular trade to be executed.

How are trades executed?

Increasingly, digital methods are used to match bids and offers electronically. A broker will receive the order, usually by electronic means from a client. There are a variety of means through which orders can be executed. If a broker holds an inventory in the stock in question, they may decide to execute the order in-house. Brokers refer to this as an internal crossing.

An Order to the Floor is perhaps the most time-consuming means to execute a trade as a floor broker will need to receive the order and then fill it. 

An Order to Market Maker is when a broker invests the trade to a market maker who is responsible for providing liquidity in a particular market. Increasingly, however, trades will be executed using digital means.

Electronic Communications Network

Electronic Communications Networks (ECNs) are a fast and efficient way to transact a trade execution. They can instantaneously match offers and bids without the need for market makers, and as a result, the charges can be considerably lower. 

The ECN will maintain anonymous order books and will receive orders from brokers and brokerages. These orders will then be matched with bid prices in the order book. As soon as a match is found, the transaction is then executed.

Open trading systems also exist, which expands the range of trading possibilities available through an ECN. If a corresponding bid match can’t be found on a network, orders can be matched on other systems. 

Archipelago is an example of one of these systems. These have increased market liquidity and fast closings. ECNs have made trade execution much more efficient for an increasing number of investors, encouraging market participation.

Hong Kong trade execution expertise

Efficient and dependable trading order execution services are essential if traders and investors want to maximise their return from the trading activities. In Hong Kong, having a broker with experience and knowledge of the region is the best scenario. Ideally, they should be based in the territory and be able to offer low-latency execution-only services to a range of different client profiles.

The trade execution services from GIS HK are technology-led, nimble and responsive, giving us an industry-leading position across the Asia-Pacific region.

To find out more about how we work, call  +852 3018 3009 or email for more information.

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