Trade Execution and Partial Fills

Many investors think that when they place an order, the execution is instantaneous, but this is not so. Even when placing an order on-line that order goes to the office of the broker, who then places it with the exchange. This means that, for a market order, the price quoted, or seen on screen, is not necessarily the price you will trade at.

Your broker has a duty of best execution on any orders received, which means if he can improve on the price quoted to you, he will. There is no guarantee he will be able to do this though. A speedy execution is another part of this duty. There are circumstances where he may have several choices of where to execute your order. Some may take more time but possibly offer a better price. Here, the chance of the price improvement would have to be weighed against the slower execution meaning there was more risk the price will move against you.

Partial Fills:

When placing a market order the risk of only obtaining a partial fill is removed, as if there is not enough market depth at the original quote the balance will be traded at the next best prices available until the order is completed. The exception would be small or illiquid stocks where there may only be a few shares bid or offered at any price. In smaller stocks he risk of market orders is that fills may be obtained at widely different prices.

With limit orders a partial fill may occur, as less favourable prices cannot be accepted. You have the option to leave the order balance at the same price, cancel it or change the limit for the remaining shares.

For more details on market and limit orders, go to Advanced Trade Types.