How Orders Are Executed

The path of an order

• Your platform sends the order with the instrument, size, direction and the price you saw.
• The broker's server checks that you have enough free margin.
• The broker either takes the other side itself or routes the order to one or more liquidity providers.
• A fill comes back with the actual price, and your position appears on the platform.

Instant versus market execution

Under instant execution the broker tries to fill you at the price you clicked. If the price has moved, it sends a requote, a new price you must accept or reject. Under market execution the broker fills you at the best price available when the order arrives, which may be better or worse than the one you saw; the difference is slippage. Most ECN and STP brokers use market execution; some market makers still use instant execution.

Why fills differ from the screen

Between the moment your screen drew a price and the moment your order reached the server, the market may have moved. In a calm market the difference is nothing. Around news, or in thin hours, it can be several pips. A broker's execution quality is measured by how often and how far its fills differ from the quoted price, in both directions; a broker that only ever slips against you has a problem worth walking away from.

Latency

Execution speed is the time between order and fill, usually quoted in milliseconds. It matters to scalpers and to automated strategies, and not much to anyone else. Brokers advertise it heavily; for most traders the spread and the reliability of fills around news matter far more than whether a fill took 20 or 80 milliseconds.

Key takeaways

• An order travels from your platform to the broker's server and is filled internally or through a liquidity provider.
• Instant execution may requote; market execution may slip.
• Fills differ from the screen when the market moves during transmission, especially around news.
• Symmetric slippage is normal; one-sided slippage is a warning sign.