No doubt as part of the “best execution” policy brokers must now adhere to Saxo has introduced order driven execution.
In a nutshell, this means that client trades could be crossed up with other Saxo customers as well as secondary markets. Order driven execution will go live on the 15th Nov for SaxotraderGo clients and the 17th November for the older SaxoGo platform.
In a note to clients Saxo said:
We are pleased to introduce Order Driven Execution for FX Spot, FX Forwards and CFD Indices, Commodities, Interest Rates and Bonds trades, meaning that the way your trade requests are executed will change from a Quote Driven Model to an Order Driven Model.
An Order Driven Model provides greater breadth of liquidity as trades are executed based on Saxo’s own liquidity pool as well as access to new, broader market venues.
Notable changes include:
- FX Spot and FX Forward execution defaults to a Limit IOC (Immediate-or-Cancel) order, providing you with greater control over the way that your order is traded through a pre-defined Price Tolerance
- Price Tolerance on a Limit IOC order defines the minimum (when selling) price differential or the maximum (when buying) price differential that you are comfortable accepting. For FX Spot and FX Forwards, the default is set to 0.01% of the Spot price for all currency pairs, but it is configurable on an individual currency pair level
- To extend the breadth of FX liquidity available to you, we will be able to connect to a broader set of market venues that typically only operate under an Order Driven Model. This means that it will be quicker and easier to get your orders into these venues
- Introduction of partial fills for FX Spot and FX Forwards
- Execution in all other product types defaults to a Resting Market order and you may experience positive or negative price movements. Resting orders may further be subject to partial fills.
- Change to the color of the trade tiles
The new Price Tolerance-feature provides an effective way to mitigate risk of unexpected volatility. Your orders will only be executed if a price can be obtained within your pre-defined price range, with any execution price improvements being passed on to you.
The Price Tolerance feature is applied by default for FX Spot and FX Forwards, but can also be applied when trading CFDs, Futures, Futures Spreads, Stocks and ETFs.
This feature allows you to define a price-range where you are comfortable with the order being executed. Depending on the instrument, Price Tolerance is expressed as a distance in pips, ticks or percentage points.
As seen below, by removing Price Tolerance, the Trade Ticket will convert the order type to a Market IOC order for FX Spot and FX Forwards, and a Resting Market order for all other product types.
Potential Price Improvements
With our Order Driven Execution, your traded instrument is subject to price movements. Price movement – either positive or negative – are always passed on to you as and when they occur.
If the price moves against you, the specified price tolerance ensures that the order is only executed if it is within the pre-defined price-range. Losses can be effectively limited with this order type. There is however no guarantee that orders can be fully or partially executed within the specified tolerance if your order settings do not meet available prices in the market.
Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.