How a trade is executed: orders, spreads and best execution
Placing an order takes seconds. Behind the confirmation sits a chain of decisions about price, venue and timing, each with a cost that rarely appears on a statement as a single line. This report follows an order from the moment it is placed to the moment the securities are in your account, and explains what you can control along the way.
Key takeaways
- What you pay is the quoted price plus the spread, commissions, taxes and, in fast markets, slippage. For private clients, EU rules judge execution on that total.
- A market order buys certainty of execution; a limit order buys certainty of price. You cannot have both.
- Spreads are widest when liquidity is thinnest: at the open, around news, in smaller companies and outside the main trading hours.
- Leveraged products such as CFDs are contracts with a provider, not shares on an exchange. Losses can exceed the margin put up for a position; for private clients, the loss is capped at the money in the account.
From order to ownership
Every purchase of a listed share or bond passes through the same five steps, whichever app or bank you use.
- The order. You tell your broker what to buy or sell, how much, and on what conditions (the order type).
- Routing. The broker sends the order to a place where it can be executed, following its published execution policy: a stock exchange, a multilateral trading facility, or a bank or market maker that deals with clients on its own account (a "systematic internaliser").
- Execution. The order is matched against an opposite order, or filled by a market maker at its quoted price. This is the moment the price is fixed.
- Confirmation. The broker reports the trade to you. For private clients in the EU, the confirmation must be sent no later than the first business day after execution.
- Settlement. Cash and securities change hands through a central securities depository. In the EU this happens two business days after the trade ("T+2"). The EU is preparing to shorten the cycle to one business day ("T+1"); the date set for the change is 11 October 2027.
Until settlement, the trade is agreed but not completed. That is why a share bought on a Monday cannot normally be used to settle a sale before Wednesday, and why dividends go to whoever holds the shares on the record date, not to whoever bought them that day.
The full report
For subscribers
The full report continues with 10 more sections, with all tables and the data behind them as CSV files for Excel. It is part of the General Assets Research Group subscription:
- Order types and what each one buys you
- The spread: the cost you do not see
- Where orders are executed
- What a trade costs
- Best execution: what your broker owes you
- Leveraged products: CFDs and margin
- Reading a trade confirmation
- Questions to ask before you trade
- Frequently asked questions
- In summary
Sources
- Directive 2014/65/EU on markets in financial instruments (MiFID II), Article 27 (best execution). EUR-Lex
- Commission Delegated Regulation (EU) 2017/565, Articles 50 (cost disclosure), 59 (reporting to clients, confirmations) and 64 to 66 (best execution). EUR-Lex
- Regulation (EU) No 600/2014 (MiFIR), Article 23 (trading obligation for shares) and Article 39a (payment for order flow), as amended by Regulation (EU) 2024/791. EUR-Lex; EUR-Lex
- ESMA Decision (EU) 2018/796 on product intervention measures for contracts for differences, later adopted as permanent national measures. EUR-Lex
- Regulation (EU) No 909/2014 on central securities depositories (CSDR), Article 5 (settlement period), and the EU decision to move to T+1 on 11 October 2027. EUR-Lex