What Is Best Execution?

Definition

Best execution is the regulatory and ethical obligation for brokers to execute client orders on the most favorable terms reasonably available. This encompasses price, speed, likelihood of execution, settlement, order size, and the nature of the transaction.

In the EU, best execution is mandated under MiFID II (Markets in Financial Instruments Directive). Other jurisdictions have similar (though sometimes less prescriptive) requirements.

Why It Matters for Retail Traders

For retail forex and CFD traders, best execution directly impacts the cost of every trade. Poor execution can manifest as:

• Wider-than-quoted spreads at the moment of execution
• Negative slippage that consistently favors the broker
• High rejection rates during volatile market conditions
• Latency between order submission and fill

Without public execution data, traders cannot verify whether their broker is meeting its best execution obligations. This is a core reason why BTI prioritizes transparency of execution metrics.

Key Metrics

Fill Ratio

The percentage of orders that are executed at the requested price or better. A fill ratio below 95% may indicate systematic issues with order handling or liquidity sourcing.

Slippage Distribution

Slippage is the difference between the expected price and the actual fill price. Best execution requires that slippage is symmetric -- positive slippage (price improvement) should occur at roughly the same frequency as negative slippage. Consistently asymmetric slippage is a red flag.

Execution Speed

The time between order submission and confirmation. While sub-millisecond execution is standard for institutional platforms, retail brokers typically operate in the 10-200ms range. The key is consistency rather than absolute speed.

Rejection Rate

The proportion of orders rejected by the broker's system. Some rejections are normal (price moved beyond tolerance), but patterns of rejection during volatile markets may suggest the broker is selectively executing orders.

How Brokers Demonstrate Best Execution

Brokers serious about best execution typically:

1. Publish an execution policy detailing how orders are handled, how prices are formed, and what happens during abnormal market conditions.
2. Disclose execution statistics including fill ratios, average slippage, and speed metrics -- ideally updated at regular intervals.
3. Name their liquidity sources so traders can understand where prices originate.
4. Explain their routing model -- whether orders are routed externally (A-book), internalized (B-book), or handled through a Smart Order Router.

What to Look For

When evaluating a broker's best execution commitment, check for the presence of:

• A publicly accessible execution policy (not behind a login wall)
• Quantitative execution data updated at least quarterly
• Named liquidity providers or price feed sources
• Clear explanation of how conflicts of interest are managed
• A documented complaints or correction process

Brokers that score highly on the BTI typically meet most or all of these criteria. See our Broker Directory for current scores, or learn more about our Scoring Methodology.