If you’re looking to trade or invest in UK or global markets, you will probably have encountered the term execution-only trading. This is a form of trade execution that is restricted purely to executing trades. Execution-only brokers will complete an order from a client in the most efficient way possible but will not give any advice that could influence their client’s investment decisions. 

Why use Execution-Only Trading? 

Execution-only trading is designed to increase efficiency and drive down trade execution costs. If you have researched the market, understand what you intend to purchase and the associated risks that a purchase may carry, then an execution-only service is frequently a sensible means by which to buy and sell equities. The execution-only broker aims to carry out trades as effectively as possible, maximising cost benefits and ensuring low latency. 

Therefore, execution-only trading is ideal for people who already understand what they want to buy or sell and appreciate the risks involved. Execution-only services are predominantly internet-based or telephone-based. This means that their charges are usually lower than trade execution services, including investment advice or other services. Because of the lack of guidance, execution-only services may not be suitable for novice traders and investors. 

How Does it Work? 

To operate efficiently, execution-only trading services will use nominee accounts. In effect, this means that a client’s investments will be registered in the execution-only brokerage’s name. The beneficial owner of the investments will still be the client. This means that the brokerage will handle the documentation related to the buying and selling of any securities. They will collect any dividends and then deposit them in the client’s account. 

Any information that may require shareholder action will be forwarded directly to the client. This is an efficient and cost-effective means of conducting best execution for knowledgeable investors. 

Researching the Market 

Execution-only brokers cannot offer detailed advice or recommendations as you may find with a full-service broker. However, they often provide services for larger financial institutions that carry out their own investment research. This research may be available to clients who ultimately make the final decision. 

There may be a range of information from the larger company and other sources such as real-time market data, trend analysis and trading ideas to help their decision-making. The broker carrying out any particular trade execution will have no opinion on the wisdom or otherwise of the trade and will offer no advice to guide a client’s decision. 

Investors can execute trades across various securities, including stocks, mutual funds, bonds, exchange-traded funds and foreign exchange.    

What Does it Cost? 

Because of the limited, focused nature of execution-only trading, it’s considerably cheaper than trade execution from a full-service brokerage. This makes it ideal for day traders, technical traders, and other experienced traders who may conduct several trades over the day. These traders will usually understand the risks, particularly those of over-trading. For this type of trader, execution-only trading is a highly cost-efficient and economical means to trade. 

Global Execution-Only Trading Services from GIS UK 

The experienced team at Global Investment Strategy offers cost-effective and competitive trade execution services from our dedicated global trading desk. Our 24/5 coverage gives our clients a real-time market advantage. We are ready to meet your multi-asset trading requirements and aim for industry-leading levels of low latency. 

To find out more about our execution-only services, call +44 (0)20 7048 9400 or email info@gisukltd.com.

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