Choosing an execution model is one of the foundational decisions a broker makes. It affects how clients experience fills, how the broker manages LP relationships, and how the dealing desk handles large-volume orders. This article explains how instant and market execution work, where each model creates friction, and how brokers can navigate the trade-offs.
Instant Execution
- A client is placing an order and specifies both volume and price.
- The order is processed immediately at the requested price.
- If the order cannot be executed with the initially requested price (i.e. the price changes during the execution process), the trader receives a re-quote order that they can accept or decline.
Instant execution is often paired with a fixed spread, which is typically wider than real market spreads. Market maker brokers commonly use this model, partly because some trading platforms do not support market depth. If a market maker were to use market execution, it would be difficult to explain to clients why an executed order filled at a worse price than the one shown at order placement. This discrepancy becomes particularly noticeable on large-volume orders, typically 30 lots and above.
The reason for the mismatch is that specific bid and ask prices are only available at specific volumes in the market. Large orders are filled according to what market depth can offer at that moment, which means the final price is not always the price the client saw when placing the order.
Market Execution
- A client places an order and specifies the volume only.
- The bid/ask price of the asset is generated during the execution process.
- If price changes during the execution process, the broker does not reject the client’s request but fills the order with the current pricing.
- The final price is the required volume multiplied by the latest pricing available via Market Depth.
Most Liquidity Providers (LPs) and A-book brokers working via STP/ECN models use Market Execution.
Tip: Trade Processor supports market execution natively across all connected platforms, including MT4, MT5, cTrader, DXTrade, Match-Trader, and TradeLocker.
Which model should brokers choose?
There is no single right or wrong answer here, and we always recommend brokers to analyse their individual situation when making the decision of which execution model to work with. However, there are pros and cons to both.
For example, because many LPs use Market Execution, brokers that work with Instant Execution might have difficulties when placing orders with those LPs. The reason for the potential difficulties, again, comes down to the Market Depth. The Liquidity Provider that uses Market Execution cannot guarantee a certain execution price to the broker. The broker that operates with Instant Execution, in turn, is obliged to ensure a certain price to the trader.
One way to avoid this issue is by implementing limited time orders. So effectively, we will be simulating Instant Execution within the Market Execution environment. Limit order guarantees the execution of a specified volume at the specified price. So, by placing a Limit order with a short timeout period, we can guarantee execution by the requested price.
However, this does not apply to the large volume orders. The reason for that, again, boils down to the Market Depth. There might not be enough volume by the requested price, and the order will not be filled. It will increase the number of re-quotes for brokers’ clients and affect the quality of execution.
For brokers running hybrid books or managing A-book flow alongside a B-book, execution model selection often needs to be applied at the account group or instrument level rather than uniformly across the entire client base. Trade Processor supports configurable execution profiles that allow brokers to apply different execution logic to different groups, instruments, and market conditions from a single interface.
What execution methods do you use and why? Please let us know at [email protected].
FAQ
What is the difference between instant execution and market execution?
With instant execution, the client specifies both volume and price, and the order fills at that price or triggers a re-quote if the price has changed. With market execution, the client specifies volume only, and the order fills at the best available current price without a re-quote option. The key difference is whether the client is guaranteed a specific price or accepts the current market price at the moment of fill.
Which execution model do liquidity providers use?
Most liquidity providers and A-book brokers using STP/ECN models operate on market execution. This creates a practical challenge for brokers running instant execution: the LP cannot guarantee a fixed price, but the broker is obligated to provide one to the client. Limit orders with short timeout periods are one way to manage this mismatch.
Why do large orders behave differently under instant execution?
Specific prices in the market are only available at specific volumes. A large order of 30 lots or more cannot always be filled entirely at one price level because market depth at that price may not cover the full volume. The order fills across multiple price levels, which means the final average price differs from the price shown at order placement, creating a visible discrepancy under instant execution.
Can a broker use both execution models?
Yes. Execution model selection does not have to be uniform across a broker’s entire client base. Brokers can apply instant execution to certain account groups or instruments and market execution to others. Trade Processor supports configurable execution profiles that allow different execution logic to be applied by group, instrument, or market condition from a single interface.
What is a re-quote?
A re-quote occurs in instant execution when the market price has moved by the time the order reaches the LP and the original price can no longer be guaranteed. The broker returns a new price to the client, who can accept or decline it. Market execution eliminates re-quotes by filling at the current available price rather than requiring a match to the original requested price.
What is a limit order and how does it help bridge the two execution models?
A limit order is an instruction to fill a specified volume at a specified price or better. It guarantees execution at the requested price but only fills if sufficient volume is available at that level. Using limit orders with a short timeout period allows brokers operating in a market execution environment to simulate the price certainty of instant execution, with the caveat that large orders may not fill if the required volume is not available at the requested price.
