Execution Only Trading guide

Home » News & Knowledge » Execution Only Trading guide

Execution Only – Trading for Beginners. Things you may need to know before you start trading on the Financial Markets.

What is a Market?

When referred to in the trading industry the financial markets are a place where people gather to make deals with financial instruments. Depending on products traded, the financial markets are divided into stock markets, commodity markets, derivative markets, currency markets and many more.

Execution Only Trading

Can I trade on the Markets?

You can! There are several ways in which you can access the markets. Generally it depends on the asset you have decided to trade.

When an individual trades on the markets themselves without a broker this is known as execution only trading. Trading execution only means an individual manages and makes their own decisions and then executes the transactions themselves.

Sometimes a trading platform may provide recommendations however it is unlikely that they will advise if the transaction is suitable for you.

The Financial Conduct Authority (“FCA”) handbook describes execution only accounts as: ‘A transaction executed by a firm upon the specific instruction of a client where the firm does not give advice on investments relating to the merits of the transaction and in relation to which the rules on assessment of appropriateness.’

Financial Instruments

There are a range of financial instruments that can be traded, just some of these are:

Stocks / Shares
Forward Contracts
Futures
CFD’s
Financial Spread Bet
Foreign Exchange
Exchange – Traded Funds (ETF’s)

What do I need to do before beginning trading?

Before you begin any sort of trading it would be beneficial to make sure you are fully aware of the risks involved with the financial instrument you want to trade.

Different types of financial instruments carry different levels of risk and it’s very important that you understand the risks involved with each instrument. There is more to the general risk that ‘investments can go down as well as up’.

It would also be beneficial to familiarise yourself with the trading platform. An aspect of this would be checking that the platform you are using is regulated and authorised by the Financial Conduct Authority (“FCA”).

This information can be found by using the FCA register, or the companies website should have this information within it, this is typically towards the bottom of a website page.

There are other aspects to take into account before trading such as:

Taking into account your objective – is this investment suitable for my objective?
Taking into account the length of time you are willing to invest – is this investment suitable for the length of time I am willing to invest the funds? Will I need access to these funds at short notice? Does this investment allow that?

Who are the Financial Conduct Authority, The Financial Ombudsman and The Financial Services Compensation Scheme?

The FCA is a regulatory body that regulates the conduct of 50,000 firms in the UK to ensure that the financial markets are honest, competitive and fair.

The Financial Ombudsman is a free service to consumers who deal with complaints between active FCA regulated financial businesses and their customers. If a financial business and a customer cannot resolve a complaint themselves, the Financial Ombudsman will give an unbiased answer about what has happened.

If the Financial Ombudsman decide someone has been treated unfairly, they can use their legal powers to put things right.

The FSCS are a body that was introduced to protect customers of financial services firms that have failed and were regulated by the FCA. If a firm is not able to pay compensation directly / or they are not longer trading, then the FSCS may be able to pay compensation if your claim is within their rules.

Click here to read our article on Advisory Trading.