Reviewed by Oct 05, 2020| Updated on
Execution is the completion of a purchase or sale order for security. The execution of an order takes place when it is filled out, not when it is placed by the investor. When an investor submits the trade, it is sent to the broker who will, then, determine the best way to carry it out.
A broker is required by law to offer the best possible execution to its investors. The Securities and Exchange Commission (SEC) allows brokers to report on stock-by-share accuracy of their executions, as well as alert customers who did not have their orders routed for best execution. Due to the growth of online brokers, the cost of executing trades has significantly decreased. Many brokers offer a commission rebate to their customers if they perform a certain amount of trades/dollar value per month. This is specifically important for a short-term trader as it is necessary to keep the execution costs as low as possible.