Definition
Execution in legal terms refers to the completion of all formalities which make a contract or agreement legally binding. It includes signing by parties involved, and in some cases, sealing and delivering the document, making it enforceable by law. In the realm of securities, execution involves the process of completing a buy or sell order for stocks or other financial instruments by a broker or trading platform.
Legal Execution
In contract law, execution involves the following steps:
- Signing: The act of signing the document by all relevant parties.
- Sealing: In some jurisdictions, certain documents require a seal to be legally binding.
- Delivery: The physical or electronic delivery of the signed document to all parties involved, ensuring that everyone has received a copy and acknowledged its receipt.
Securities Execution
In finance, execution is the act of completing an order, which includes:
- Order Placement: The investor places an order through a broker or trading platform.
- Matchmaking: The broker or the trading platform matches the buy or sell order with an opposite order.
- Completion: The actual transfer of securities from seller to buyer and the funds from buyer to seller.
Examples
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Legal Execution Example:
- A real estate purchase agreement is signed by the buyer and seller, notarized (sealed), and delivered to both parties, thus legally binding the parties to the terms of the contract.
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Securities Execution Example:
- An investor places an order to buy 100 shares of XYZ Corporation through their broker. The broker matches the buy order with a corresponding sell order and completes the transaction – this is the execution of the trade.
Frequently Asked Questions (FAQs)
What does execution mean in a legal context?
In a legal context, execution refers to the process of signing, sealing (if necessary), and delivering a document to make it enforceable.
How does execution work in securities trading?
In securities trading, execution involves the completion of a trade order by matching a buyer’s order with a seller’s order, followed by the transfer of securities and payment.
Is a contract enforceable if not executed properly?
No, a contract that is not properly executed may not be legally enforceable as it does not meet the formal requirements such as signatures, sealing, or delivery.
What is the significance of sealing a document?
In some jurisdictions, certain formal documents require a seal to signify authenticity and formality, further validating the document.
What entities can execute trade orders in securities markets?
Trade orders in securities markets can be executed by brokers, trading platforms, and in some cases, automated trading systems.
Related Terms
- Contract: A legally binding agreement between two or more parties.
- Broker: A person or platform that arranges transactions between buyers and sellers.
- Order: An instruction to buy or sell a security.
- Notarization: The official process of certifying a document by a notary public.
- Seal: A formal mark or stamp on a document indicating its authenticity.
Online Resources
Suggested Books for Further Studies
- “Business Law: Text and Cases” by Kenneth W. Clarkson, Roger LeRoy Miller, Frank B. Cross
- “The Handbook of Electronic Trading” by Joseph Rosen and Patricia Passmore
- “Securities Regulation” by James D. Cox and Robert W. Hillman
Fundamentals of Execution: Law and Securities Basics Quiz
Thank you for delving into the intricate processes of execution across law and securities! Use the knowledge and quizzes to reinforce your understanding and application in real-world scenarios.
