If you were to peek over a professional trader's shoulder to look at their computer screen, you'd see a line with numbers above and below the line. These are buy and sell offers. When the trader gets a message from a client, he or she has to look at all those numbers and find the "best bid" or best price for that client.
Example:
A client wants to buy a million shares of GOOG on a "best execution" basis. The trader looks at the offers to sell GOOG, which are all over the place: $582.34, $582.12, $582.23, etc. He is obligated to take the best price for his client (the cheapest price). But sometimes the cheapest price is only good for 100 shares. In that case, the trader takes the smaller chunks in pieces, starting from best bid, until he can fulfill the million-share order.
Related or Semi-related Video
Finance: What is Best Execution?2 Views
Finance allah shmoop What is best execution it's a toss
up between marie antoinette william wallace and berlin ned stark
and well this guy all right well in finance land
however best execution happens when a broker in a transaction
is giving the client the best price and service possible
That might mean choosing the lowest prices on offers if
the clients buying stocks or it might mean doing some
fancy footwork financially to make a trade move smoothly and
quickly that is the broker acting on behalf of her
client is executing the transaction Best A client cletus wants
a million shares of whatever dot com you the broker
can offer a first traunch or ten percent of the
order or one hundred thousand shares at twenty three thirteen
But when you look on the computer matching box grid
there's an offer to sell a million at the higher
price of twenty three eighteen if those million higher price
shares are sold suddenly in a block to someone else
and glam o there's no supply in the market Well
the stock likely pops You'd guess it would print up
twenty maybe thirty cents a share within fifteen seconds of
that trade getting announced well the client wanted a million
shares but you the broker only got him one hundred
thousand shares And yes you got it form a twenty
three thirteen but that was only ten percent of what
he wanted And now the best offer to buy those
shares is twenty three Forty So yes you've got the
first hundred thousand shares cheap but you didn't do what
your client wanted or order So what was the best
execution in this case Well you should have gotten cletus
the million shares a twenty three eighteen That was the
way to go and would've been the best execution of 00:01:45.308 --> [endTime] this trade Way better than this one
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