What is an execution-only trading service?

When looking at trade execution, you will come across three different terms, execution-only trading, advisory trading, and discretionary trading. An execution-only broker will carry out the client's instructions without giving any advice or guidance. While this is relatively straightforward, the action of trade execution needs to be fast (low latency) and transparent with prompt reporting.

What are the benefits of execution-only trading?

As execution-only brokers do not offer any form of advice or guidance to their clients, the cost of trading is extremely competitive. Therefore, this type of service is perfect for those who do their own research and do not require any input from a broker. In addition, an execution-only broker needs to offer a fast, reliable service to maximise trading volumes. This means that traders can buy and sell an investment quickly and maximise their returns due to relatively low costs.

Execution-only online trading

Historically, an execution-only brokerage took instructions from clients over the telephone, with trade execution carried out electronically. The Internet has added an additional option for brokerages. Assuming traders have the relevant funding on deposit, they can carry out execution-only trades online, directly with the markets. There will be occasions where trade execution instructions will need to be passed by telephone due to liquidity issues or fast-moving markets. This is still deemed an execution-only transaction, as long as no advice is given.

Some execution-only brokers offer an array of additional services. These may include technical charts and third-party research notes, which can be used as part of an investor’s decision-making process. 

Execution only client agreements

While there are many standard regulatory protections for execution-only, advisory, and discretionary investors, execution-only client agreements are very specific. The broker gives no advice, no guidance is offered, and all investment decisions are the client's responsibility. However, this does not remove the responsibility of the broker to provide the best execution in a timely, accurate, and efficient manner.

We live in an era of electronic trading, nominee accounts, and more efficient settlement procedures. Consequently, whether you are an execution-only, advisory, or discretionary client, all client investments will be held in the broker's nominee account. The underlying client will still be the beneficial owner, but the use of broker nominee accounts allows for a swift settlement. Any dividends will be collected on the client's behalf and forwarded to a designated bank account. When it comes to stock corporate actions such as takeovers, fundraisings, etc., the broker will receive details and deliver them to the client for instructions.

Cost-effective trade execution

As execution-only brokers offer a no-frills service to their clients, costs are relatively low compared to full-service brokers. These low-cost services attract the attention of day traders, technical traders, and those who carry out their own investment research. The low cost of execution-only transactions allows investors to trade on relatively small price movements.

Behind the scenes, this is anything but a no-frills service with brokers using the latest technology and low latency trading platforms. From receiving trade execution instructions to dealing, settlement, and stock custody/safekeeping, the process should be seamless. As a result, execution-only brokers are judged not only on the speed at which they can carry out trades but also on reliability and dependency behind the scenes.

GIS UK trading services

We offer various investment services here at GIS UK, including execution-only trading and asset/investment management. These are opposite ends of the advisory spectrum, but both require low latency efficient trade execution. In addition, our dedicated global trading desk is open 24 hours a day, five days a week, providing access to a range of investment markets.

If you require more information about our execution-only services, please call +44 (0)20 7048 9400 or email info@gisukltd.com.
 

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