My Personal Finance Journey

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How Fast Is Fast?

Contributed by mm | December 6, 2004 4:03 PM PST

If you are trading stocks online, you must be mindful about how fast your broker can execute your orders. But how fast is fast?

When I started my online investment four years ago, Datek (now part of AmeriTrade) was my first online broker. At that time, Datek was boasting its "industry-leading" 60-second execution guarantee (or the trade is free). Back then, it was pretty cool to watch the Streamer and see how fast your order turns into a real transaction.

Fast forward four years and there have been tremedous improvements in online order execution. This Barron's Online article best captures what happened in terms of execution agility:

2002: E*Trade introduced 9-second guarantee.
2003: AmeriTrade and Fidelity raised the bar to 5-second guarantee.
March 2004: E*Trade started to offer 2-second guarantee.
May 2004: Fidelity begged to differ by offering one-second order execution and national best bid or offer (NBBO) guarantee.

A pretty solid offering from Fidelity nevertheless, Fidelity's guarantee is not without its limitations. For example, your order has to be for S&P 500 index components, number of shares traded should be between 100 and 500, and the order should be entered between 9:45 a.m. and 3:59 p.m. ET.

Now, the remaining question is: for majority of the investors who do not trade frequently, is there really a difference between one-second guarantee or two-second guarantee? I doubt it. Anyway, I have account with Fidelity myself, so I cannot complain about this one-second deal.

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