The execution broker finishes processing an order placed by a client.
An executive broker is a type of merchant or financial broker responsible for completing and processing an order entered by a client. As part of the process, brokers of this type will review the order to ensure that it complies with current policies and procedures and complies with the regulations established by the market in which the order will be traded. Only after the executing broker is satisfied that the order is suitable does he actually proceed to execute the order on behalf of the client and place it for trading on the market.
The role of an executive broker is a bit different than that of a clearing broker. Clearing brokers typically interact directly with investor clients and manage verification processes with these clients on potential trades. The executing broker, on the other hand, focuses on what happens after the client requests a specific transaction to be executed. In this sense, this type of brokerage is functioning as a gatekeeper that determines if the order structure complies with current regulations and is considered legal and suitable for trading. Unlike the clearing broker who focuses on helping the client gain wealth, the executing broker is primarily concerned with order fulfillment in terms of meeting legal and market standards.
When a functioning broker discovers that a particular order does not conform to the standards set by a market or exchange, or does not fully comply with government trading regulations, that broker will reject the order. In most cases, this means returning the rejected order to the clearing broker, along with the reasons for the rejection. This allows the clearing broker to review the issue with the client, restructure the order to meet government and market standards, and resubmit the order for execution.
The work of the executing broker benefits the market, the broker, and ultimately the investor. By focusing on the legalities related to an order, the broker protects the market from harm, possibly to the point of negatively affecting other investors. At the same time, the broker’s efforts help protect the brokerage from being censured by government trading officials and possibly losing its market position for a period of time. This type of broker also helps prevent investors from inadvertently violating trading regulations and possibly facing fines or even imprisonment as a result of the wrong order.