Market volatility, trading volume and system availability may influence the parameters of trade executions, that is, price, speed and rate of execution. In fast and changing market conditions price can undergo dramatic changes, which will cause difference between the initial price (available at the time the order is submitted) and the execution price. This means price improvements do not necessarily take place, and, moreover, they cannot be guaranteed.
However, best execution issue cannot be just stripped down to the ‘best price’ case. On the buy side, market participants will look to the total cost of the trade – to execute, allocate and settle that trade. Moreover, operational risks in movement of cash between counterparties are also taken into consideration here.
Brokerage firms should do their best to provide consistent and accurate pricing to the clients, along with shortest possible time of execution.
TCA (Transaction cost analysis) certainly has to be mentioned here too. In forex this concept is yet evolving, whereas equity markets have applied it for years. The factors that support its implementation in forex are multiple, and one of the most influential is recent technological advancement, which has made hi-fi transaction data available.
Another classification divides forex execution into two types: No Dealing Desk (NDD) and Dealing Desk.
Conditions for best trade executions need expert evaluation as they come as a complex of performance characteristics.