What is an execution broker? (with photo)

The execution broker finishes processing an order placed by a customer.

An executive broker is a type of trader or financial broker responsible for completing and processing an order entered by a customer. As part of the process, brokers of this type will review the order to make sure that it complies with current policies and procedures and complies with regulations established by the market on which the order will be traded. Only after the executing broker is convinced that the order is appropriate, does he actually proceed to execute the order on behalf of the client and place it for trading on the market.

The role of an executive broker is a little different from that of a clearing broker. Clearing brokers typically interact directly with investor clients and manage the processes of checking with these clients about potential trades. On the other hand, the executing broker focuses on what happens after the client requests that a specific transaction be put to execution. In this sense, this type of brokerage is functioning as a gatekeeper who determines if the order structure meets the current regulations and is considered legal and suitable for the trade. Unlike the clearing broker which focuses on helping the client to gain wealth, the executing broker is primarily concerned with order fulfillment in terms of complying with legal and market standards.

When a running broker discovers that a particular order does not conform to the standards set by a market or exchange, or otherwise does not fully comply with government trading regulations, that broker will reject the order. In most cases, this means returning the rejected order to the clearing broker, along with the reasons for the rejection. This allows the clearing broker to revisit the issue with the client, restructure the order to comply with market and government standards, and resubmit the order for execution.

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The work of the executing broker benefits the market, the broker and, ultimately, the investor. By focusing on the legalities related to an order, the broker protects the market from being harmed in any way, possibly to the point of adversely affecting other investors. At the same time, the broker’s efforts help protect the brokerage from being censored by government trade officials and possibly losing market position for a period of time. This type of broker also helps prevent investors from inadvertently violating trading regulations and possibly facing fines or even imprisonment as a result of the improper order.

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