- Best Execution
Best Execution refers to the obligation of an investment services firm (such as a
stock broker) executing orders on behalf of customers to ensure that the prices those orders receive reflect the optimal mix of price improvement, speed and likelihood of execution. Brokers with customer orders are obligated to send orders to venues with the optimal "best execution stats."
Evaluating Best Execution
In order for a brokerage firm to determine its compliance with the Best Execution requirement, the brokerage must evaluate the orders it receives from all customers in the aggregate and assess which competing
markets, market makers, or electronic communications networks (ECNs) offer the most favorable terms of execution. Ultimately, the decision on best execution is made by selecting preferences of market centers or counterparties who consistently meet or exceed certain benchmarks for quality.
Some of the factors a broker needs to consider when executing its customers' orders for best execution include: the opportunity to get a better price than what is currently quoted, the speed of execution, and the likelihood trade will be executed. [http://www.sec.gov/answers/bestex.htm] Best Execution is often mistaken for trading at touch price without taking into consideration factors such as the size of trade or settlement period.
"Price improvement" – the opportunity, but not the guarantee, that an order will be executed at a better price than what is currently quoted publicly. Price improvement is an evaluation of a market center that is calculated over time, and is compared using
*Markets in Financial Investments Directive is a
European UnionDirective which, among other things, solidifies best execution regulations.
* [http://www.edhec-risk.com/latest_news/Business%20_Strategy_Issues/RISKArticle.2007-01-16.2316/attachments/Transaction%20Cost%20Analysis%20in%20Europe.pdf TCA in Europe] - Edhec Risk Advisory survey
*cite web | title=U.S. Securities and Exchange Commission | work=Best Execution | url=http://www.sec.gov/answers/bestex.htm| accessdate=2006-04-12
*cite web | title=U.S. Securities and Exchange Commission | work=Trade Execution: What Every Investor Should Know | url=http://www.sec.gov/investor/pubs/tradexec.htm| accessdate=2006-04-12
Wikimedia Foundation. 2010.
Look at other dictionaries:
Best Execution — The responsibility of brokers to provide the most advantageous, or best price, order execution for customers. Basically, this is a precautionary measure placed on brokers by the SEC to ensure that investors best interests are always served … Investment dictionary
best execution — The act of achieving the most advantageous price for a transaction of a particular type and size. The duty is always owed to private customers as well as to non private customers unless they have waived this right. Dresdner Kleinwort Wasserstein… … Financial and business terms
Execution — The completion of a buy or sell order for a security. The execution of an order happens when it is completely filled, not when it is placed by the investor. When the investor places the trade, it goes to a broker, who then determines the best way … Investment dictionary
EXECUTION — (Civil), laws concerning methods of recovering a debt. Definition and Substance of the Concept In Jewish law, a debt or obligation (ḥiyyuv) creates in favor of the creditor not only a personal right of action against the debtor, but also a right… … Encyclopedia of Judaism
Execution by burning — has a long history as a method of punishment for crimes such as treason, heresy and witchcraft (burning, however, was actually less common than hanging, pressing, or drowning as a punishment for witchcraft). This method of execution fell into… … Wikipedia
Best practice — is an idea that asserts that there is a , method, process, activity, incentive or reward that is more effective at delivering a particular outcome than any other technique, method, process, etc. The idea is that with proper processes, checks, and … Wikipedia
execution — The process of completing an order to buy or sell securities. Once a trade is executed (see: execution), it is reported by a Confirmation Report; settlement (payment and transfer of ownership) occurs in the U.S. between one ( mutual funds) and… … Financial and business terms
Execution — The process of completing an order to buy or sell securities. Once a trade is executed, it is reported by a Confirmation Report; settlement (payment and transfer of ownership) occurs in the U.S. between 1 ( mutual funds) and 5 ( stocks) days… … Financial and business terms
Execution of the Báb — On the morning of July 9, 1850 in Tabriz, a young Persian merchant known as the Báb was charged with apostasy and shot by order of the Prime Minister of the Persian Empire.cite encyclopedia |encyclopedia= Encyclopædia Iranica |year= 1989 |article … Wikipedia
Best, worst and average case — In computer science, best, worst and average cases of a given algorithm express what the resource usage is at least , at most and on average , respectively. Usually the resource being considered is running time, but it could also be memory or… … Wikipedia