When a trader submits an order, it doesn't simply materialize at the exact price on screen. The order travels through a routing process that determines who ultimately takes the other side of the trade and at what price it fills. Understanding this pipeline explains why execution quality varies so much between brokers and account types.
Market Execution vs Instant Execution
Under market execution, the trader accepts whatever price is available at the moment the order reaches liquidity — there is no guaranteed price, and the fill may differ slightly from the price shown on screen (this is where slippage occurs). Under instant execution, the platform attempts to fill exactly at the quoted price; if that price is no longer available, the order is either rejected or a requote is offered for the trader to accept or decline.
Where Orders Actually Go
In a dealing desk (market maker) model, the broker itself takes the opposite side of many client trades internally, only hedging net exposure externally when needed. In an agency or STP (straight-through processing) model, orders are passed directly to external liquidity providers — banks, non-bank market makers, or an ECN — without the broker taking the other side.
| Model | Who takes the other side | Typical execution |
|---|---|---|
| Dealing desk / market maker | The broker, internally | Often instant execution with requotes |
| STP (straight-through) | External liquidity provider | Market execution, variable spread |
| ECN / aggregated liquidity | Multiple providers via an order book | Market execution, raw spread plus commission |
Aggregated Liquidity and ECN Order Books
An ECN (electronic communication network) model aggregates quotes from multiple banks and liquidity providers into a single visible order book, matching client orders against the best available prices from that pool. This tends to produce tighter, more transparent pricing but usually comes with a separate commission since the raw spread reflects genuine market conditions rather than a broker markup.
Why the Execution Model Matters to Traders
- ▸Scalpers and news traders generally need market execution with minimal requote risk to act quickly.
- ▸Traders prioritizing price certainty over guaranteed fill may prefer instant execution despite occasional requotes.
- ▸Understanding the execution model helps interpret why fills sometimes differ from the displayed price.
- ▸Execution model is independent of platform choice — the same platform (e.g. MT4) can be configured under different broker execution models.
Each execution model suits different trading styles and order sizes. Evaluating execution quality requires looking at actual fill data over time — average slippage, rejection rate, and speed — rather than assuming one labeled model is inherently superior.
Reading Execution Reports
Many brokers now provide execution quality reports showing average slippage, percentage of orders filled at the requested price, and average execution speed. Reviewing these reports periodically, alongside a trader's own journal of fill discrepancies, gives a realistic picture of execution quality beyond marketing claims.