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What Defines Execution Quality?
How it's measured?
Fidelity Statistics for Q4 2016 and Q1 2017
Percentage of shares executed at prices better than the prevailing National Best Bid or Offer (NBBO), i.e., either below the best offer for buys or above the best bid for sells.
% of shares that are price improved:
Percentage of shares executed at or within the National Best Bid or Offer (NBBO), which is a consolidated quote representing the highest bid and lowest offer for a security across all exchanges and/or market makers. It is updated continuously during market hours.
% of shares that fall within the NBBO:
Average period between the time Fidelity receives an order and the time of order execution.
0.12 of a second
Average execution speed:
The distance from the midpoint of the market at the time when your order is entered to the execution price you receive. This value is doubled to capture the whole bid/offer spread. This amount captures both how often, and by how much, a broker-dealer improves the price of a share.
Average effective spread:
Fidelity's Approach to Execution Quality
Fidelity has an internal order flow management team that is independent from Fidelity's trading desks. The team is is responsible for directing order flow to the best performing market makers and market centers. The order flow management team uses both internal and external technology to generate reports that identify any order that executes outside the National Best Bid or Offer (NBBO). To help ensure that our high standards are met, Fidelity's order flow management team has established policies and procedures to:
- Supervise order flow routing activities
- Define execution quality measures, which play a role in determining where orders are routed
- Monitor and evaluate competing market centers for order handling and execution quality
- Identify and qualify orders executed outside the NBBO
- Take corrective action for failure to meet Fidelity's execution quality standards
Services are provided by Fidelity Capital Markets, which is a division of National Financial Services LLC (NFS). NFS is a Fidelity Investments company.