Ubiquitous Language
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Broker: Person who acts as an intermediary between a buyer and seller, usually charging a commission. Broker added value is to identify potential counter parties.
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Exchange: A marketplace in which shares, options and futures on stocks, bonds, commodities, and indexes are traded. Traditionally, an exchange has been a physical location for trading securities. Trading is handled, at least in part, by an open outcry or dual auction system.
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An Investor communicates his trade interests to (human) brokers who search for counterparties at exchanges to complete trades.
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Trader: An investor who makes many trades throughout a trading day, buying and selling securities in order to profit from short-term changes in prices.
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Order: An instruction, especially to a broker, to buy, sell, or conduct some other transaction involving a security or commodity. For example, if a client wishes to buy 100 shares in AT&T, he/she makes an order to a broker to that effect. Orders may take a number of forms. For instance:
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A market order is an order to conduct a transaction at the current market price.
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A limit order is an order to conduct a transaction at a stated price or better.
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A stop (loss) order is an order to conduct a transaction at the best available price triggered when the price reaches a given threshold.
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A stop-limit order is a stop order that becomes a limit order when the stated price (known as the stop price) is reached. (ref: the freedictionary.com)
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Order routing: is the process by which an order for financial instruments (currencies, securities, commodities, derivatives, futures, options,...) goes from a end user (e.g. trader) to an exchange. An order may go directly to the exchange from the end user, or it may go first to a broker who then routes the order to the exchange.
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Routing Destination / Execution Venue: means a broker, a dealer (e.g. bank) or a venue/exchange/market where we can route orders to.
- A "Smart" Order Routing (SOR) system attempts to improve the efficiency of the trading value chain by selecting most favourable execution prices among fragmented markets/exchanges. In other words, the SOR attempts to achieve best execution of trades while minimizing market impact. To do so, the SOR automates the selection of execution venues and methodology in order to assure best execution, systematizes the selection process, and reduce execution costs.
"It is designed to help firms in an increasingly fragmented market to search for hidden liquidity, find opportunities in dark pools and use algorithms to maximize results without moving the market" (source: MarketsWiki)