Important Information on Order Execution Everyone Should Know

As trading has become one of the trending topics everywhere, it has managed to gain a lot of attention and importance. The option trading is another great way of getting the grant the right to buy options contracts but are you aware of options trading strategies and order execution?

Brokers are required by law to execute any order issued to them in the most efficient manner possible, and many will have their own order execution policies outlining their processes and responsibilities to their clients.

When placing an order whether buying or selling)on your behalf, brokers must get the best possible result, they should never postpone or stop your transaction.However, it is important to keep in mind that a ‘dealing desk’ broker may execute your trade by keeping it ‘in house,’ not offsetting their exposure on it. Liquidity providers are evaluated on a regular basis for their quality and execution ability.

You risk missing out on the buy/sell price that prompted you to place the order in the first place if your order is not executed properly and promptly.

Where are orders carried out? 

Without any dealer intervention or requotes, your trading positions are immediately offset and passed straight through to the underlying market.

Good online brokers will always endeavour to guarantee that your order is completed in the most cost-effective way possible, assisting you in getting the transaction you want based on the quoted buy/sell pricing, by constantly comparing the best liquidity providers.

Order execution necessitates the broker’s access to a dependable liquidity pool, which, due to competition among liquidity providers, typically benefits the trader.

One of the most important criteria to consider when choosing an online broker is order execution reliability, which means that the price you see is more likely to be the price you get.

Is the Execution of Orders Crucial? 

Order execution is important and has an impact depending on the conditions, particularly the type of order you submit. When placing a limit order, for example, the only risk is that the order will not be filled. When placing a market order, the importance of timeliness and price execution increases.

Conditions and Restrictions for Order Execution 

It is quite possible that most of the orders placed are market orders but the others may be subject to conditions that limit or alter how and when they can be executed. A limit order, for example, is a conditional order that sets a specific price above/below which a purchase/sale cannot happen.

The Securities and Exchange Commission (SEC) Intervenes 

The SEC has taken steps to guarantee that investors obtain the best execution by requiring brokers to publish execution quality on a stock-by-stock basis, including how market orders are executed and how the execution price compares to the effective spreads of the public quote.

Furthermore, when a broker executes an order from an investor using a limit order at a lower price than the public quotes, the broker is required to reveal the details of the lower price. It’s a lot easier to figure out which brokers obtain the greatest prices and which ones just use them as a marketing tool now that these standards are in place.

Time is a very important thing and should be included in the options trading strategies and other criterias as well. There are other criterias where the order can be put into action.