Now, how would you determine the quality of execution of a trade.
The first thing is the time to take to fill a trade, this is where your broker has the most control. If a market order does not fill immediately, of course for a liquid stock, then there is a serious issue with the execution. If an open-market order executes far from open time, then there is a problem. If you place a limit order at a price preferential to the current bid or ask and you don’t see your price on your real-time ticker as the current bid or ask, then there is a problem.
Settlement is also an issue. You see, it is supposed to be (say on the US markets) T+3, which is 3 business days after trade. Same applies to dividend. If the money shows at the end of the settlement date or the next day (and the excuse they will give is back-office accounting), then they have deprived you from a day and they gained one extra. You see, if you are running a $100mm fund, interest on one day, even at .35% annualized (which is a reasonable overnight rate for USD) is around a thousand dollars.
Notifications are also important. That is, you should have a ticket confirming your trade and showing everything associated with it maximum next business day. If it shows late, or if you see multiple tickets (canceled trades) or fees that you do not recognize, then your broker has an issue.
Now, for pricing, here the broker might give (plausible) market excuses. If a market order on the NYSE or AMEX executes at an average price far from the then bid/ask, then your broker has a problem. If your limit order does not fill completely, even when you see the bid/ask cross your limit, then you have an issue. If an open order executes at a price far from the listed open-price, then there is a problem.
This goes to Short fees (the fees the broker charges you for going short), margin fees and interest, notifications if you exceed margin or need to replenish account. Overall, “you are as good as your help,” and the broker is your interface to the market, so you may end up losing overall while you are really winning every trade.
You have to observe these things, and talk to your broker immediately if you perceive a problem. You see the American old saying is, “the squeaky wheel gets the grease!” If you are uncomfortable, change brokers. That is it. After all, it is your money they are messing with, regardless of whether you are the owner or the fiduciary; it is your responsibility!
Quantitative Finance 