What happens when an order is filled?

When you decide to buy or sell a financial instrument such as a stock or an options contract, you will have to inform all other potential buyers and sellers of your intentions by sending an order to the market. In this order you specify the financial product you would like to trade, how many shares you would like to trade, how much you are willing to pay or receive for each share, and which order type and duration it should be. Please refer to the Order Types and Placing an Order sections in our Helpdesk for more information.

However, not everyone can enter orders on financial markets. Only those who have a membership at an exchange are allowed to place orders. This is why you need an investment account at a broker such as DEGIRO to trade on financial markets. If you do not have such an account yet, click here to open one for free. Whenever you enter an order in our platform, we send that order to the respective market. This can be done either directly (Direct to Market) or by sending the order to one of our Prime Brokers (Morgan Stanley, Société Générale, or ABN Amro Clearing Bank). For more information on how your orders are routed, please visit the Products & Markets page.

When your order has arrived at the place of execution, it is entered into the order book so that all other market participants can see your order.

If there is another open order that matches the conditions of your order and your order is the first in the order book, the party that issued that order can take the other side of the trade, thereby 'filling' your order.

Note that it is possible that the other party cannot fill your order completely because it does not have the same amount of products available for the same price. This is known as a 'partial fill' or 'partial execution' of your order. In this case, your order can either be filled with more than one transaction, or remain only partially filled because there is no other party that can or wants to fill the remainder of your order. The degree of ease with which your orders can be filled is what is known as the liquidity.

When an order is filled, all relevant parties involved are informed that a trade has been made. On the one hand, the place of execution informs the brokers of both buyer and seller so that they can relay the confirmation to their clients, and on the other hand they inform the parties that secure the transaction. These parties are usually the relevant central counterparty (CCP) - also sometimes called a 'central clearing house' or a combination of these names.

A CCP serves as the intermediary that makes sure that both parties live up to their end of the trade. To do this, they monitor the account balances of their clients (i.e., brokers & other financial institutions) on a daily basis to ensure that they have enough capital to fulfil the trade obligation. In effect, they step in to take the position of both the seller and the buyer, thereby becoming the new counterparty for both parties of the trade. They record the details of the trade in their administration and create open positions for (the custodians of) both parties. The open positions serve as a recorded obligation for both parties of the trade: one party has to deliver the cash and the other must deliver the financial instrument(s).

In the final stage of the trade, the Central Securities Depository (CSD) will record the change of ownership of the financial instrument in their administration and send the confirmations back through the custody chain. These days, this is usually via a book entry, since shares are often no longer physical certificates.

For more information on how a transaction of a financial instrument is settled, please refer to article 13.7 of the Client Agreement.