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How a Team of Professional Traders Can Make Your DIY Trades Better

Written by The Inspired Investor Team  | Published on September 21, 2023

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You've done the research. You've decided to buy or sell, and select the order type. You hit “submit" and place your trade. What happens next? More than you might think. At RBC, your order sets in motion an intricate process involving trading professionals and technologies to help get the best possible price. That's decades of experience, mobilized in the blink of an eye.

"We have multiple instances, almost daily, where we have been able to generate significant savings for clients as a whole," says Jeff Varey, VP Equity Agency Trading at RBC Wealth Management. Decisions made on the RBC trading desk can lead to trades being executed at prices better than the quoted market price, which benefits clients. With the backing of experienced traders and artificial-intelligence-based trading algorithms, for example, RBC's trading desk attempts to save pennies per share on every order, which can be significant for investors who trade frequently and/or in large order sizes in certain securities.

While brokerage firms have a regulatory obligation to obtain the most advantageous execution terms possible under the circumstances, says Varey, the approach (and outcome) ultimately depends on the firm. “RBC regularly monitors order execution quality to ensure, even go beyond, our obligation to 'best execution' standards," Varey says – whether you're Joe or Jane Investor, or a large institution.

To do this, at RBC Direct Investing several factors are evaluated, including price, how easily a trade can be executed (liquidity), order size, the trade's potential market impact and any specific instructions an investor provides.

How RBC best execution can save you money and maximize your trades

RBC Direct Investing serves you when executing trades. Many trades are monitored, filtered and routed via electronic systems. Straightforward, low-risk trades are often routed in milliseconds. Complex trades, or trades that could net negative results for a client if sent through unassisted, will be sent to a human on the trading desk to handle manually. Here are some techniques the RBC trading desk might employ:

Speed trades up to avoid slippage. The difference between the expected execution price when an order is placed (say, the market price) and the average price of execution is called “slippage." In most cases, the faster a transaction can be carried out, the lower the risk of losing value to slippage.

Slow trades down for price stability. Say you place an order for a thinly traded security with a particularly wide spread between prices. Rather than execute right away, a trader may review the order until there's more consensus around a security's price, in order to help execute the best trade for you. Similarly, order execution may be delayed for particularly volatile securities (e.g. niche exchange-traded funds before the market open) to help ensure the most advantageous price. For many investors, the delay can mean a difference of pennies, but for Direct Investing clients as a whole, this can add up to hundreds of thousands in savings.

Catch unfortunate errors. In some instances before executing your trade, RBC Direct Investing can flag that you have made a common mistake, such as picking the wrong symbol or entering a price that significantly deviates from the quote.

Make moves behind the scenes. In the background, our trading desk partners can use a variety of tools and technologies to facilitate (mostly large) transactions at the best price. For example, say you choose to buy or sell large block of a thinly traded security – a trader could determine that breaking your order into smaller orders that have a higher likelihood of being filled at better prices is the way to go.

THINK OF IT LIKE THIS: You're in search of a perfectly made latte. Two local spots have the same beans but one has experienced baristas who work with top-of-the-line equipment to deliver the best coffee. In the end, it's better value and amazing service. And, you deserve it.

Similarly, while all brokerage firms must have practices in place to achieve best execution, the quality of execution (and how much you save) can differ depending on the expertise of the team handling trades and the technology they have access to.

As you've probably guessed by now, while brokerages are all held to the same best execution standard, not all are created equal. At RBC, our goal is always to get you the best possible price – and we have the expertise and technology to help us make it happen.

RBC Direct Investing Inc. and Royal Bank of Canada are separate corporate entities which are affiliated. RBC Direct Investing Inc. is a wholly owned subsidiary of Royal Bank of Canada and is a Member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. Royal Bank of Canada and certain of its issuers are related to RBC Direct Investing Inc. RBC Direct Investing Inc. does not provide investment advice or recommendations regarding the purchase or sale of any securities. Investors are responsible for their own investment decisions. RBC Direct Investing is a business name used by RBC Direct Investing Inc. ® / ™ Trademark(s) of Royal Bank of Canada. RBC and Royal Bank are registered trademarks of Royal Bank of Canada. Used under licence. © Royal Bank of Canada 2023.

Any information, opinions or views provided in this document, including hyperlinks to the RBC Direct Investing Inc. website or the websites of its affiliates or third parties, are for your general information only, and are not intended to provide legal, investment, financial, accounting, tax or other professional advice. While information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by RBC Direct Investing Inc. or its affiliates. You should consult with your advisor before taking any action based upon the information contained in this document.

Furthermore, the products, services and securities referred to in this publication are only available in Canada and other jurisdictions where they may be legally offered for sale. If you are not currently a resident of Canada, you should not access the information available on the RBC Direct Investing Inc. website.

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