Background on trading

Private investors trade shares through stockbrokers. Brokers typically request prices from a number of market makers called RSPs who offer prices in “retail” (relatively small) sized volumes.

The price supplied to you by a broker is the best price they have been quoted by the RSPs they deal with. These, in turn, are based on the price available on the London Stock Exchange’s order books. Traditionally, you can only trade via your broker at the price supplied by an RSP and unexecuted limit orders are warehoused by the broker and not displayed to the entire market.

Order book trading

While stockbrokers typically execute trades through the RSP network, the majority of institutional trading takes place on the Exchange’s order books. Larger securities trade on order books which electronically match buyers and sellers.

An increasing number of brokers now offer DMA, which enables you to enter your own orders directly onto the order book without the need for an RSP intermediary. This provides the opportunity to:

• trade in larger sizes than typically available from RSPs 
• set your own price rather than simply take the price offered by the RSP
• display unexecuted limit orders to the entire market