Best execution is a broker/dealer's obligation to execute customer orders at the best price available. While there is no one standard of what determines best execution, speed of transaction, execution price, price improvement opportunities and liquidity are typically listed by our clients as the factors that are most important to them.
Some of the common factors that determine best execution include, but are not limited to: current market conditions, speed of execution, size and type of order, the number of available primary markets for a particular security, and volatility.
National Best Bid and Offer (NBBO) is an SEC regulation requiring brokers to guarantee customers the best available ask price when buying securities and best available bid price when selling. NBBO is the consolidated quotation for a single security that is representative of the highest bid price available and the lowest offer price available among all quoting market centers.
Do you guarantee national best bid and offer (NBBO)?
YES. TradeKing guarantees the national best bid or offer (NBBO), or better, on market orders as well as marketable limit orders. TradeKing will reimburse clients the commission on the trade if we do not get the (NBBO) or better.
Do you use smart order routing technology?
TradeKing utilizes industry-leading intelligent order routing technologies. This technology sweeps the market for NBBO or better prices and executes transactions at the best available price.
The smart order routing technology we use for options is an industry-leading and highly customizable platform. It uses real-time, streaming market data to make the best decisions possible about how to execute your options orders.
It takes real-time market quotes and displayed size at the time we receive your order. If price and size on multiple exchanges are available to fill your order, the system takes into account which exchanges have the best functionality for different types of orders (i.e. spreads, buy-writes, stop orders, etc...); which specialists give the best service and execution quality; and finally, preferences for one exchange over another.
Price improvement is a critical component of best execution today. The system will seek out price improvement opportunities in options via a proprietary modeling tool that indicates when a high probability for price improvement exists. It does this without compromising the confidentiality of your order. It only attempts to send a price improvement order to the market when there may be a high probability of it being accepted; otherwise, it continues to route the order to the market(s) where it will get instantaneous, automated execution at the NBBO.
If there is insufficient liquidity at one NBBO destination to satisfy your order, the router will split the order and access multiple exchanges simultaneously. This requires no additional work on your part.
All these factors are added into the routing logic to arrive at the best decision for each order.
TradeKing guarantees that each order is executed at the national best bid or offer (NBBO)
on market or marketable limit orders.
We demand the NBBO on every executed order and we will reimburse your commission if we do not get it.
Not all orders are eligible for NBBO treatment. Some of the non eligible are stop orders,
advanced orders, limit orders not entered at the current bid/ask, orders during "fast markets",
orders placed at any exchange which designates that it is temporarily not eligible for NBBO treatment,
and those entered for opening rotation.
A market center is a place where order executions occur. Even with the current consolidation in this environment, there are hundreds of different market centers that execute orders. These markets vary from physical exchanges with human specialist that hold auctions, to ECNs that electronically match buyers and sellers. These markets all provide prices on individual securities, which then make up the NBBO.
No, even in today's highly electronic environment, not all market centers are automated. TRADEKING attempts to utilize automated markets whenever possible, but there may be circumstances when that is not possible. Some physical market centers that employ specialists in a manual trading environment can still exist. Trading in this type of environment can take several minutes to complete/execute orders.
MOC orders are market orders designed to execute at the close of the market. TRADEKING accepts MOC orders until 3:40 p.m. ET. For Listed MOC orders, placed prior to 3:40 ET, TRADEKING will route to destinations that participate within the NASDAQ Official Closing Price (NOCP). Orders that are not NOCP eligible will receive the last print of the day on the primary exchange for that security. For NASDAQ MOC orders, market centers utilized by TRADEKING execute at the NASDAQ Official Closing Price (NOCP).
More information about the NOCP can be found on the NASDAQ Web site. (
http://www.nasdaq.com)
The NASDAQ opening cross is a centralized order facility that will provided market participants and investors with a highly transparent and accurate single opening price in NASDAQ-Listed securities. The NOOP is not to be confused with the consolidated opening price. The NOOP calculation does not affect the consolidated opening price or its calculation in any way.
The NASDAQ closing cross offers investors a transparent primary market close. The NOCP value is disseminated at 4:01:30 p.m. ET. The NOCP is not to be confused with the consolidated last sale price, which is comprised of the final last sale eligible trade report submitted to the Securities Information Processor (SIP) during the regular trading session by any market center, including NASDAQ. The NOCP calculation does not affect the consolidated last sale price or its calculation in any way.
Since TRADEKING routes orders to numerous liquidity providers, liquidity increases the probability that your order will be filled in its entirety. Some liquidity providers/systems offer liquidity (or shares) over and above what the quote indicates, helping orders fill in entirety. Quotes seen online may only offer the displayed quote size, meaning that by the time your order is filled, you may have received many partial executions, which may be at prices higher than what was displayed when you originally entered your order.
No. When using TRADEKING to place an order, your order is placed over the internet. TRADEKING then decides which market center to route the order to. A similar process occurs when you contact TRADEKING to place a trade via telephone.
No. TRADEKING is not a market maker and does not internalize client orders. We dynamically assess multiple market centers and distribute your order to the market center that, based on our analysis, generally should deliver best execution.
TRADEKING receives payment for order flow from certain market centers. This payment is used to offset the costs of doing business and ultimately helps to reduce the overall cost to TRADEKING customers. However, our clients' best interests always come first, so best execution will always supersede payment for order flow.
More info.
Price improvement refers to getting the price better then expected. It is the opportunity, but not the guarantee, for an order to be executed at a better price than the NBBO. The amount of improvement can vary from fractions of a penny per share to whole pennies over the NBBO.
No. Not every order receives price improvement
A fast market is a market with excessive volatility, which may reduce the likelihood that you will receive the instantaneous fill report at the price you saw when you entered your order. During this time, executions and confirmations slow down, while reports of prices lag behind actual prices. Fast markets are usually due to events such as news on a specific underlying security or economic announcements that affect the overall market.
In the event of (1) a disruption or malfunction related to the use or operation of any quotation, communication, or trade reporting system owned or operated by NASD or its subsidiaries and authorized by the Commission, or (2) extraordinary market conditions in which the nullification or modification of transactions may be necessary for the maintenance of a fair and orderly market or the protection of investors and the public interest, an Executive Vice President of NASD's Market Regulation Department or an Executive Vice President of NASD's Transparency Services Department, or any officer designated by such Executive Vice President, may, on his or her own motion, review any transaction arising out of or reported through any such quotation, communication, or trade reporting system. An NASD officer acting pursuant to this paragraph may declare any such transaction null and void or modify the terms of any such transaction if the officer determines that (i) the transaction is clearly erroneous, or (ii) such actions are necessary for the maintenance of a fair and orderly market or the protection of investors and the public interest; provided, however, that the officer shall take action pursuant to this paragraph as soon as possible after becoming aware of the transaction, but in all cases by 3:00 p.m., Eastern Time, on the next trading day following the date of the transaction at issue.
