Definition
Slippage, rejects, and fill quality are the observable outcomes of the execution process. Slippage is the difference between the price displayed when the client submits the order and the price at which the order is actually filled. Rejects occur when an LP or the broker's system declines to execute the order at the requested price. Fill rate measures the percentage of orders that are successfully executed without requote or rejection.
These metrics are the "scoreboard" of execution quality. While spreads, speed, and routing logic are inputs to the execution process, slippage and fill rates are the outputs that clients actually experience. Evaluating a broker's execution quality requires examining these outcomes, not just the inputs.
What It Is / What It Is Not
What These Metrics ARE
- Slippage: price difference between displayed/requested and actually filled
- Positive slippage (price improvement): fill better than requested
- Negative slippage: fill worse than requested -- costs the client money
- Reject: LP or broker refuses to fill the order; client must resubmit
- Requote: broker returns a new price for client approval before execution
- Fill rate: percentage of orders executed without reject or requote
What These Metrics ARE NOT
- Not inherently indicative of manipulation -- some slippage is natural market movement
- Not the same as spread -- slippage occurs on top of whatever spread was quoted
- Not solely the broker's doing -- LP behavior, market conditions, and latency all contribute
- Not symmetric by default -- asymmetric slippage (negative favored) is a red flag
- Not avoidable entirely -- only reducible through better infrastructure and LP management
- Not standardized in reporting -- brokers define and measure these differently
Slippage Mechanics
Slippage occurs because the market moves between the moment the client sees the price and the moment the LP fills the order. The magnitude depends on market volatility, order size, execution latency, and the LP's fill policy.
| Type | Definition | Cause |
|---|---|---|
| Positive (price improvement) | Client gets a better price than requested | Market moved in client's favor during execution |
| Negative (adverse) | Client gets a worse price than requested | Market moved against client; LP filled at new market price |
| Zero (no slippage) | Order filled at exactly the requested price | Market did not move, or LP filled at original quote |
| Asymmetric | Negative slippage passed through; positive slippage retained | Broker or LP policy: last look rejects favorable moves, fills adverse ones |
Asymmetric slippage is the single most important red flag in execution quality analysis. In a fair execution environment, slippage should be roughly symmetric: the client should experience positive and negative slippage in roughly equal proportions. If negative slippage significantly exceeds positive slippage, the execution model is structurally disadvantaging the client.
Rejection Causes
| Cause | Origin | Impact |
|---|---|---|
| LP last look rejection | LP side | LP holds order, market moves, LP rejects. Order fails; client must retry. |
| Stale quote | Broker/LP side | Quoted price expired before order reached LP. Common during fast markets. |
| Insufficient liquidity | LP/ECN side | Order size exceeds available depth at quoted price. Partial fill or reject. |
| Risk limit breach | Broker/PoP side | Order would exceed broker or PoP credit/risk limits. Rejected pre-LP. |
| Price deviation filter | Broker side | Broker's bridge rejects because price moved beyond configured tolerance. |
Fill Quality Metrics
A comprehensive view of execution quality requires examining multiple metrics together. No single number tells the full story.
| Metric | What It Tells You | Good Benchmark |
|---|---|---|
| Fill rate | % of orders executed without reject/requote | > 95% in normal conditions; > 85% during high volatility |
| Average slippage | Mean price deviation from requested price | Should be near zero and roughly symmetric |
| Slippage symmetry ratio | Positive slippage events / negative slippage events | Close to 1.0; ratios below 0.5 suggest asymmetric execution |
| Effective spread | Actual cost = displayed spread + slippage | Should be close to displayed spread; large gaps indicate hidden costs |
| Price improvement rate | % of orders filled at a better price than requested | > 20% in competitive NDD environments; near 0% is a red flag |
Where It Appears in the Execution Stack
Benefits & Trade-offs of Monitoring Execution Outcomes
| Factor | Detail | |
|---|---|---|
| Transparency | Monitoring reveals true execution cost beyond the quoted spread | |
| LP accountability | Per-LP fill rate data enables evidence-based LP management | |
| Asymmetry detection | Slippage symmetry analysis exposes unfair execution models | |
| Complexity | Requires tick-level data collection and statistical analysis | |
| Broker reluctance | Most brokers do not voluntarily publish granular execution statistics | |
| Market context | High-volatility periods naturally produce more slippage -- context matters |
Common Marketing Claims vs Reality
| Claim | Reality |
|---|---|
| "99% fill rate" | Ask how this is calculated. Does it include limit orders (which always fill when triggered)? Market order fill rates during volatile conditions are the relevant benchmark. |
| "No requotes" | Some brokers eliminate requotes by widening maximum slippage tolerance. The order fills, but at a worse price. No requote does not mean no slippage. |
| "Price improvement on X% of orders" | Meaningful only if the magnitude of price improvement is disclosed alongside the magnitude of negative slippage. 30% positive at 0.1 pips and 70% negative at 0.5 pips is a net negative for clients. |
| "Zero slippage guarantee" | Physically impossible in a live market. If offered, the broker is likely internalizing (B-book) the order and absorbing the slippage risk itself. |
What to look for in an Execution Policy
- Does the execution policy publish fill rate statistics for market orders?
- Is slippage data reported with symmetry analysis (positive vs negative)?
- Does the broker disclose effective spread vs quoted spread?
- Are execution statistics segmented by market condition (normal vs volatile)?
- Does the policy explain the requote / rejection policy and tolerance thresholds?
- Is there independent audit or third-party verification of execution quality claims?
See a Public Routing Disclosure Example
NDD.broker publishes detailed order routing and execution policy documentation, including LP composition, priority logic, and conflict mitigation. This serves as a reference implementation of the concepts described above.
Educational content only. This is not financial advice. Always consult qualified professionals before making trading decisions.