Path of an online order

Anatomy of an Order

When you place an order at your favorite online retail destination, its path from their warehouse to your doorstep is fairly straightforward. Conversely, the path of an order to buy or sell a stock in the marketplace can be complex.

As you might imagine, technology has significantly advanced since Scottrade.com launched 20 years ago. Under normal market conditions, it only takes milliseconds to route your orders for execution at our various market centers.

So how does your order navigate the marketplace, receive an execution and end up in your account?

“It’s an amazing process,” said Matt Billings, senior vice president of trading services for Scottrade, Inc. “Investors have a variety of trading options. Regardless of which approach they may take, our clients’ orders are interacting with the market in fractions of a second from the time they are placed.”

Client orders are sorted into two types, based on immediacy or specific conditions:

  1. Marketable orders. An active order that is priced for immediate execution in the marketplace.
  2. Non-marketable orders. A passive order that is not priced for immediate execution in the marketplace.

Marketable orders can be routed to and receive an execution at several possible venues:

  • Market makers. These are broker-dealers willing to commit their own funds to help fill client orders, often providing executions at prices better than the market at the time of order entry.
  • Alternative Trading Systems. An ATS is a trading system that matches buy and sell orders against one another. These venues seek to minimize potential market impact of a given order.
  • Stock exchanges. Venues which can be physical and/or electronic, that facilitate the buying and selling of securities.

Similarly, non-marketable orders can be routed for execution to any of the three types of venues listed above. Once an execution occurs, the shares or cash will be delivered into your account upon settlement.

“The decision-making process of how an order is routed into the marketplace is a result of a regular and rigorous review of destination execution quality conducted by the firm,” said Billings. “Scottrade thoroughly reviews key execution quality metrics including price improvement percentage, at-or-better percentage and savings per order across multiple time horizons, order sizes and order types in an effort to provide a quality execution for our clients.”

Next Steps: How fast and accurate are trades? Find out more about trade quality and execution at Scottrade.

The content provided is for informational and/or educational purposes only and should not be considered a recommendation or an endorsement of any specific investment strategy. Your choice to engage in a particular investment or investment strategy should be based solely on your own research and evaluation of the risks involved, your financial circumstances, and your investment objectives. You are fully responsible for your investment decisions.

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