Inside Every Schwab Execution
Many broker-dealers talk about their execution processes and statistics. But at Schwab, we’re proud to explain exactly how your orders are executed and to ensure you have the information you need to accurately evaluate the execution quality of your orders.
By gaining an understanding of execution quality statistics, you can deepen your understanding of the trading process and the role each component plays. Since no single statistic can accurately depict the entire process, it’s important to assess execution quality by looking at them as a whole.
Execution speed.
To understand speed, it’s important to know that your order goes through multiple steps between entry and full execution.
| Steps in the process | Time dependencies |
| 1. Customer places the order 2. Order routed to appropriate Market Center |
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| 3. Order executed at Market Center |
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| 4. Electronic trade report is generated 5. Customer receives trade confirmation from Schwab |
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Many times you’ll hear claims for orders being executed in a few seconds. These claims often apply only to the “first fill”—the moment at which the first share of an order is acquired at the desired price—and not the time it takes to execute the entire order. But Schwab measures execution speed in terms of the time it takes to fill your order completely, known as a “full fill.”
Execution price.
In evaluating the quality of an execution, you’ll want to know how closely it was executed to the National Best Bid or Offer (NBBO), which is defined as the best price displayed in the market to buy or sell a particular security. Since the number of shares available at the NBBO fluctuates for any given security, finding the volume you want at the exact price you seek can be difficult.
The more quickly your order is routed, the greater the likelihood you’ll receive the price you expect. Thanks to proprietary intelligent order-routing technology at UBS LLC, 84.0% of Schwab clients' NASDAQ Market shares were price improved by an aggregate of $1,272,4061 and 89.9% Listed Market shares were improved by $1,507,5992 in Q4, 2011.
Price improvement.
Price improvement occurs when an order is executed at a better price than the displayed NBBO. Since UBS Securities LLC holds positions in certain securities, it's often able to execute orders at prices that are even better than what’s currently available at the NBBO.
Effective/Quoted Ratio.
The Effective/Quoted Ratio compares the average effective spread with the quoted spread—essentially the difference between the NBBO offer and the NBBO bid at the time of order entry.
Simply put, an Effective/Quoted Ratio of 100% means that the effective spread and the quoted spread were the same and the order was executed at the NBBO. The lower the ratio, the lower the execution cost to the customer.
Find out more.
View glossary.
1. Applies to Schwab market orders of 100 to 1,999 shares of NASDAQ 100 Index securities executed on all market venues.
2. Applies to Schwab market orders of 100 to 1,999 shares of S&P 500® Index securities executed on all market venues.
NASDAQ: Applies to Schwab market orders of 100 to 1,999 shares of NASDAQ 100 Index securities executed on all market venues.
Market Maker performance statistics are derived from SEC Rule 605 order execution data files by Thomson Reuters Transaction Analytics, an independent third-party vendor that is not affiliated with Charles Schwab & Co., Inc. The Market Maker Average represents the volume-weighted performance of all market makers posting Rule 605 data in Q4, 2011.