Share purchase - execution price?

Share purchase - execution price?

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Original Poster:

43,753 posts

208 months

Saturday 19th April
quotequote all
I'm curious as to who decides what the execution price is when you but or sell shares.

I normally buy through my bank (First Direct) and it gives you a buy/sell spread e.g 1000p - 1010p

If I put in a "BUY" offer at £10.10 and the price moves to £10.20 then obviously the purchase fails to go through. What happens if the price falls to £10? Is my purchase price still £10.10 or do I get the cheapest price available?

If I pay £10.10 I assume the bank keeps the profit for themselves which seems like a win-win situation for them (i.e. price goes down then they profit, price goes up then it's no sale)

NowWatchThisDrive

905 posts

116 months

Sunday 20th April
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When you deal in London-listed equities through most retail brokers in the UK, they send an automated Request for Quote to a network of Retail Service Providers (essentially banks and market making firms who make two-way prices and fill orders against their own inventory in order to provide liquidity and profit from the bid-offer spread). Each RSP sends back a price or declines to quote pretty much instantly, then your broker shows you the best and gives you 10-30 seconds to accept it. During that period the RSP can amend a quote, or kill it if the market's moving too quickly - and reserves the ultimate right to reject a deal at the point of acceptance anyway - but generally they should honour the price you deal on.

With international stocks, the nuts and bolts of dealing may be pretty much the same or somewhat different, as the varying market structures can mean other arrangements and dynamics coming into play (e.g. payment for order flow in US stocks).

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Original Poster:

43,753 posts

208 months

Sunday 20th April
quotequote all
Thanks for the info.

I suppose my question is

1. I’ve told my broker I’m happy to pay up to £10
2. The RSP offers £9

Is my broker obliged to pass on the cheaper price to me or can he pocket the difference?

NowWatchThisDrive

905 posts

116 months

Sunday 20th April
quotequote all
The former; your broker's just an intermediary so there's no financial benefit to them if you end up paying a higher price, it doesn't end up in their pocket or anything. In fact they have a heavy regulatory burden to ensure you're not getting done over on price at time of execution - check out MiFID II and best execution rules if you're particularly interested (and/or prone to insomnia).

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Original Poster:

43,753 posts

208 months

Sunday 20th April
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Cheers thumbup

LeoSayer

7,473 posts

256 months

Monday 21st April
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It's described in their best ex policy

Edited by LeoSayer on Monday 21st April 07:50