Details of the execution of market orders
When opening a position to buy or sell, the trader activates the market order. The system analyzes the bid and the best current price is selected for the client. This occurs in the following fashion: of all the orders that are in the system, the counter position with the closest (best) price for the selected instrument of a suitable size is chosen.
If in the order book a position is found that is suitable in terms of size and price, then both transactions (belonging to the trader and the owner of the respective position) are executed at a price that is most advantageous to both parties. We emphasize that the ECN-broker does not take any part in determination of the price! His objective is to provide the fastest selection of the best priced corresponding counter position. In a situation where the size of the bid found is insufficient to execute the trader's order at the best price, the missing amount is "made up" from other positions in the "order book". In so doing, the trader's order is executed at an average price.
Thanks to the latest technology the entire procedure takes a few moments, and, considering that all transactions are performed according to market execution, the trader is freed from having to requote his bids. The process is fully automated, and human intervention is excluded at all stages. It is not important to the broker how traders perform trading, although perhaps this is not strictly true. It is beneficial for the ECN-broker if his clients trade successfully, because he is directly interested in increasing the total volume of their trade operations.
Details of the execution of market orders in cases of insufficient liquidity
According to our regulations a certain amount of time is allocated for the execution of each market order. If for any reason (for example, due to a lack of liquidity) an order cannot be fully executed within the allotted time, then it is executed partially, i.e. at a specified time part of the order size is executed, and the remaining part of the order is canceled with the client notified by a corresponding message. We will now examine this execution option in more detail.
Let's assume a trader opens a "Buy 30 lots" position in EUR / USD, but the total amount for sale for this instrument in the "order book" is currently 21 lots. Correspondingly, after the time for the execution of the market order has expired, a buy order will be executed for the available amount at an average price (calculated on the basis of all positions in the "order book"), meaning that the Buy 21 lots EUR / USD position will be open to the client.
Part of the order for the insufficient amount for this instrument will be canceled, and the trader will receive notification of this.
However, the system also provides for an arbitrary option for partial execution of market orders.
Let's assume that a trader wants to close partially a position to buy 8 lots in EUR / USD, having executed the close operation for only part of the amount of the position at the current price, namely 5 lots. In the order modification window he can select the desired size for the operation and run the procedure for closing the position.
When the position is partially closed, the trader receives a corresponding system message, which is reflected in the trading history.
The terminal will save the open market position in EUR/USD for the remaining amount of 3 lots.
In executing the pending orders there are also important nuances, as described in the corresponding section.