Case study Broker trade executions

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Re: Case study Broker trade executions

Post by triceratop » Wed Nov 22, 2017 6:28 pm

livesoft wrote:
Wed Nov 22, 2017 5:29 pm
Yes, trades placed today and today's volume in DGS was about 25% of the reported Average Daily Volume.
From what I see now, buy transaction is stated to have occurred at 12:08:18 and the sell at 12:08, but they were surely executed within 1 second of each other (as fast as I could click "confirm" in two windows).

Perhaps more interesting is that I decided to buy some more shares of DGS later in the day to round-out my odd lot and paid 49.68 (market order) while the charts show the lowest price was 49.69.
Not very interesting unless you bought more than an odd lot.
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Re: Case study Broker trade executions

Post by livesoft » Wed Nov 22, 2017 6:33 pm

Ha! Maybe I will always buy odd lots from now on in order to get better prices. :)
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Re: Case study Broker trade executions

Post by livesoft » Mon Nov 27, 2017 9:22 am

I need to transfer some shares from an account at one financial institution to another account at another financial institution. The easiest way for me to do this is to sell in one account and buy in another account. I am going to avoid any bid/ask spread issues by submitting opposing buy and sell orders before the market opens so that the trade occurs at the opening cross, so that the buy and sell prices should be identical. Both accounts are tax-advantaged and have no commissions, so no tax consequences and no fees as well.

Orders submitted. I'll update in a few minutes.

And the update: That didn't work out too well. I used limit orders and the opening cross price was below my limit order, so the buy executed, but the sell did not. Price is trading lower as I type this. I will probably just wait until the price goes back up before selling.
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Re: Case study Broker trade executions

Post by whodidntante » Mon Nov 27, 2017 9:38 pm

livesoft wrote:
Mon Nov 27, 2017 9:22 am
I need to transfer some shares from an account at one financial institution to another account at another financial institution. The easiest way for me to do this is to sell in one account and buy in another account. I am going to avoid any bid/ask spread issues by submitting opposing buy and sell orders before the market opens so that the trade occurs at the opening cross, so that the buy and sell prices should be identical. Both accounts are tax-advantaged and have no commissions, so no tax consequences and no fees as well.

Orders submitted. I'll update in a few minutes.

And the update: That didn't work out too well. I used limit orders and the opening cross price was below my limit order, so the buy executed, but the sell did not. Price is trading lower as I type this. I will probably just wait until the price goes back up before selling.
I did this successfully with an ETF that has an awful spread and periods where nobody seems really interested in buying. I submitted the limit sell order and nothing happened, but it executed immediately when I issued the limit buy at the other broker.

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Re: Case study Broker trade executions

Post by livesoft » Tue Nov 28, 2017 1:38 pm

And another update: With equities up across the board today, I was able to sell the shares I wanted to sell yesterday at a higher limit price than what I had set yesterday. So in effect, a nice net 0.4% one-day return on cash overall. Of course, it really wasn't cash and I had to increase the risk of my portfolio for 24 hours.
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Re: Case study Broker trade executions

Post by technovelist » Sat Dec 02, 2017 7:22 pm

I always use limit orders when buying or selling anything at Fidelity.

When buying, I generally use a price $0.01 above the last price, and the inverse when selling.

I usually get a little bit of price improvement so it doesn't actually end up costing me any significant amount.

I do it only to avoid a flash crash or the reverse.
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Re: Case study Broker trade executions

Post by jhfenton » Tue Jan 16, 2018 10:59 am

I decided to test out a market open ETF swap this this morning with VSS. (I have VSS in multiple accounts, and I may want to move some around for rebalancing at some point.)

VSS closed at $123.48 on Friday, and I guessed that it would open moderately higher (~$124) based on overseas market activity the last two days. So at about 9:00 AM, I placed a sell limit order at $123.00 for 1 share of VSS in one IRA and a buy limit order at $125.00 for 1 share of VSS in another IRA. Shortly after 9:30 AM I got two texts. Both orders executed at a price of $123.80, so I'm just out the SEC fee on the sale.

Result: You can do the opening cross swap with limit orders, as long as you make them wide enough that both sides execute.

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Re: Case study Broker trade executions

Post by Doc » Tue Jan 16, 2018 11:20 am

jhfenton wrote:
Tue Jan 16, 2018 10:59 am
Shortly after 9:30 AM I got two texts. Both orders executed at a price of $123.80, so I'm just out the SEC fee on the sale.
I don't know all the in's and outs of premarket trading but

1) Your orders did get executed in the opening "cross" :idea:

and

2) You sold it to yourself. :D
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Re: Case study Broker trade executions

Post by jhfenton » Tue Jan 16, 2018 12:53 pm

Doc wrote:
Tue Jan 16, 2018 11:20 am
jhfenton wrote:
Tue Jan 16, 2018 10:59 am
Shortly after 9:30 AM I got two texts. Both orders executed at a price of $123.80, so I'm just out the SEC fee on the sale.
I don't know all the in's and outs of premarket trading but

1) Your orders did get executed in the opening "cross" :idea:

and

2) You sold it to yourself. :D
Yep. I was trying to get the opening cross. I had never tried that before, and I wanted to confirm that it worked as expected in a low-stakes experiment. It was worth the $0.01 I lost.

VSS typically has a spread between 5 and 10 cents and trades sporadically, so this would be one good way to rebalance between accounts.

My preferred way to swap is to sell VSS on a day it is trading at a substantial premium and buy the mutual fund version (VFSVX) at NAV. I call Vanguard later and convert the VFSVX to VSS. (I occasionally do that within the same account to profit from the premium.) Today, though, VSS is trading at a modest discount to NAV, so the opening cross strategy would be better.

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Re: Case study Broker trade executions

Post by Doc » Tue Jan 16, 2018 3:11 pm

jhfenton wrote:
Tue Jan 16, 2018 12:53 pm
Yep. I was trying to get the opening cross. I had never tried that before, and I wanted to confirm that it worked as expected in a low-stakes experiment. It was worth the $0.01 I lost.

VSS typically has a spread between 5 and 10 cents and trades sporadically, so this would be one good way to rebalance between accounts.

My preferred way to swap is to sell VSS on a day it is trading at a substantial premium and buy the mutual fund version (VFSVX) at NAV. I call Vanguard later and convert the VFSVX to VSS. (I occasionally do that within the same account to profit from the premium.) Today, though, VSS is trading at a modest discount to NAV, so the opening cross strategy would be better.
Something to think about. Thanks.
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Re: Case study Broker trade executions

Post by livesoft » Tue Jan 16, 2018 3:37 pm

^Thanks for that info.

Re: MOC. There are issues with MOC orders, so I would avoid them myself. But your broker will do executions at the market opening cross without any special order as has been shown in this thread. That is, one doesn't specify market-on-open orders if they want to execute at the opening cross.
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Re: Case study Broker trade executions

Post by Chip » Tue Jan 16, 2018 3:59 pm

Does it matter that jhfenton's test with VSS was for only one share? I don't want to go back and reread the thread, but I seem to remember some info that odd lot orders might receive different (and more favorable) treatment than 100+ share orders.

On the flip side, I was thinking of a MOO buy order a while back but cancelled it because I became concerned that the order was too large compared to the usual volume for that particular ETF. I was concerned my order would move a thin market at the open. I don't know if that was a valid concern or not. Nor how to determine it. :)

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Re: Case study Broker trade executions

Post by jhfenton » Tue Jan 16, 2018 7:13 pm

Chip wrote:
Tue Jan 16, 2018 3:59 pm
Does it matter that jhfenton's test with VSS was for only one share? I don't want to go back and reread the thread, but I seem to remember some info that odd lot orders might receive different (and more favorable) treatment than 100+ share orders.

On the flip side, I was thinking of a MOO buy order a while back but cancelled it because I became concerned that the order was too large compared to the usual volume for that particular ETF. I was concerned my order would move a thin market at the open. I don't know if that was a valid concern or not. Nor how to determine it. :)
If you are just buying or selling a thinly-traded ETF, a one-sided MOO order could definitely move the crossing price. I will probably not use MOO orders in any situation but a "sale to myself" scenario.

I don't see how a 1,000 share MOO buy and 1,000 share MOO sell could move the crossing price. You'd be throwing the same extra weight on both sides, and the market-clearing price should be the same.

1,000 shares should work the same as 1 share. Everyone should get the same exact price at the opening cross. If you look at the Yahoo! Finance quote for VSS, you'll see that the Open was $123.80, and that was the price I received. It shouldn't even matter if you use different brokers (though both of my accounts were at Vanguard).

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Re: Case study Broker trade executions

Post by grabiner » Tue Jan 16, 2018 8:23 pm

jhfenton wrote:
Tue Jan 16, 2018 7:13 pm
Chip wrote:
Tue Jan 16, 2018 3:59 pm
Does it matter that jhfenton's test with VSS was for only one share? I don't want to go back and reread the thread, but I seem to remember some info that odd lot orders might receive different (and more favorable) treatment than 100+ share orders.

On the flip side, I was thinking of a MOO buy order a while back but cancelled it because I became concerned that the order was too large compared to the usual volume for that particular ETF. I was concerned my order would move a thin market at the open. I don't know if that was a valid concern or not. Nor how to determine it. :)
If you are just buying or selling a thinly-traded ETF, a one-sided MOO order could definitely move the crossing price. I will probably not use MOO orders in any situation but a "sale to myself" scenario.
I have seen days when VSS opened with no trades, and an opening spread around $1 (which usually narrowed in a few minutes). A market-on-open on such a day would be equivalent to buying at the opening ask, or selling at the opening bid, so you would lose a large spread.
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Re: Case study Broker trade executions

Post by jhfenton » Tue Jan 16, 2018 10:15 pm

grabiner wrote:
Tue Jan 16, 2018 8:23 pm
I have seen days when VSS opened with no trades, and an opening spread around $1 (which usually narrowed in a few minutes). A market-on-open on such a day would be equivalent to buying at the opening ask, or selling at the opening bid, so you would lose a large spread.
1. I'm skeptical that VSS could have a failed open auction at this point in its life. That can only happen on securities with zero crossing interest.

Question: How would you check that historically? The opening cross and volume don't show up on the trade lists I can find online. They don't show up in many of the online charts. I'm not sure they show up in the typical volume counter you see online.

2. I don't see how there could be a failed opening auction if you entered opposing, matching, and overlapping LOO orders as I did today. By definition, that is crossing interest, therefore the security can't have a failed auction. (As I said earlier, I would not actually use a MOO.)

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Re: Case study Broker trade executions

Post by stlutz » Tue Jan 16, 2018 10:24 pm

You might be interested in registering at this site to see historical during-the-day trade data: https://surveyor.trlm.com/.

When I look I'm seeing thousands of shares of VSS traded at the open every day.

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Re: Case study Broker trade executions

Post by lazyday » Wed Jan 17, 2018 4:49 am

From another thread:
saltycaper wrote:
Mon Jan 15, 2018 12:54 am
I need to sell a few dozen shares of an ETF in one account and buy the same number of shares in another account, and I need to place the orders while the market is closed.
livesoft wrote:
Mon Jan 15, 2018 6:54 am
Just place market orders for regular hours while the market is closed. Both orders will execute at the next opening cross for the exact same price. There will not be any spread at the opening cross, by definition. This is convenient and described in the Case study Broker trade executions thread.
I could just use two market orders, but I prefer not to do this ever, and particularly not at market open.
Why not? This is exactly what one should do if you want to buy and sell at the exact same price.
Does anyone know if this is guaranteed to work? I would be concerned that one of my brokers will not route my trade to NASDAQ, and so it will not trade in the opening cross. Maybe the trade could be filled by the broker itself, or on another exchange?

When I want to "move" shares from one account to another, I wait for a narrow spread and place both orders at the same time. I might do several small orders this way if bid or ask are too small.

If ordinary (not MOO) market orders placed before the open guarantees me the same price on both the buy and sell, then I would rather do that.

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Re: Case study Broker trade executions

Post by saltycaper » Wed Jan 17, 2018 6:20 am

lazyday wrote:
Wed Jan 17, 2018 4:49 am
From another thread:
saltycaper wrote:
Mon Jan 15, 2018 12:54 am
I need to sell a few dozen shares of an ETF in one account and buy the same number of shares in another account, and I need to place the orders while the market is closed.
livesoft wrote:
Mon Jan 15, 2018 6:54 am
Just place market orders for regular hours while the market is closed. Both orders will execute at the next opening cross for the exact same price. There will not be any spread at the opening cross, by definition. This is convenient and described in the Case study Broker trade executions thread.
I could just use two market orders, but I prefer not to do this ever, and particularly not at market open.
Why not? This is exactly what one should do if you want to buy and sell at the exact same price.
Does anyone know if this is guaranteed to work? I would be concerned that one of my brokers will not route my trade to NASDAQ, and so it will not trade in the opening cross. Maybe the trade could be filled by the broker itself, or on another exchange?

When I want to "move" shares from one account to another, I wait for a narrow spread and place both orders at the same time. I might do several small orders this way if bid or ask are too small.

If ordinary (not MOO) market orders placed before the open guarantees me the same price on both the buy and sell, then I would rather do that.
I have not posted an update in the other thread yet, but by placing two market orders (not MOO) before the open, I received the opening price for both the buy and the sell, no spread, just as livesoft said. I am still suspicious about whether this is "guaranteed" to happen, or if it's just something that will happen practically all the time.
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Re: Case study Broker trade executions

Post by lazyday » Wed Jan 17, 2018 7:28 am

Thanks, salty.

Doing a bit more googling, it seems NASDAQ started its opening cross in 2004. http://ir.nasdaq.com/releasedetail.cfm?releaseid=177255

Investopedia:
DEFINITION of 'Opening Cross'
A method used by the Nasdaq to determine the opening price for an individual stock. This method accumulates data on the buy and sell interest in the stock two minutes before the market open. The Nasdaq makes this information available to all investors.
NYSE has an opening cross too, though "Only NYSE and NYSE MKT-listed names can participate in the opening auction". https://www.nyse.com/publicdocs/nyse/ma ... _Sheet.pdf

VSS for example, is "NYSE Arca" according to https://institutional.vanguard.com/VGAp ... undId=3184 but I don't know if that means it's included or excluded from the NYSE cross.

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Re: Case study Broker trade executions

Post by Doc » Wed Jan 17, 2018 11:08 am

1) Is the opening cross useful in tax loss harvesting when you are trying to avoid wash sales by using not substantially-identical ETF's?

2) Is it useful for buying Foreign ETF's when at least the European markets are open if not Asia?
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Re: Case study Broker trade executions

Post by triceratop » Wed Jan 17, 2018 12:11 pm

Doc wrote:
Wed Jan 17, 2018 11:08 am
1) Is the opening cross useful in tax loss harvesting when you are trying to avoid wash sales by using not substantially-identical ETF's?

2) Is it useful for buying Foreign ETF's when at least the European markets are open if not Asia?
1) I don't see why it would be useful for that. Maybe a little more detail would help?

2) the opening cross only ensures a zero spread; there is no guarantee made about the size of the discount/premium to NAV (this is always true, not just at the opening cross). See also the discussion on the opening cross in Reducing your ETF Trading Costs. I would say the answer to this is "no".
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Re: Case study Broker trade executions

Post by livesoft » Wed Jan 17, 2018 2:24 pm

Yes, VEA, VWO, and VNQ are all darlings of day traders and very liquid.
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Re: Case study Broker trade executions

Post by livesoft » Wed Jan 17, 2018 3:33 pm

Since trades are free one can submit 3 or 4 orders of $25K to $50K each with no worries within seconds of each of them. Or submit non marketable limit orders then change them to market orders one at a time.

After all, if you are going to be making big trades, then you might as well have some fun experimenting. I experiment all the time -- which is a reason this thread exists.
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Re: Case study Broker trade executions

Post by ftobin » Wed Jan 17, 2018 5:41 pm

lazyday wrote:
Wed Jan 17, 2018 7:28 am
VSS for example, is "NYSE Arca" according to https://institutional.vanguard.com/VGAp ... undId=3184 but I don't know if that means it's included or excluded from the NYSE cross.
Probably just old literature. All market makers are going to execute your orders at the opening price of the listing exchange for the security.

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Re: Case study Broker trade executions

Post by Doc » Wed Jan 17, 2018 6:43 pm

triceratop wrote:
Wed Jan 17, 2018 12:11 pm
Doc wrote:
Wed Jan 17, 2018 11:08 am
1) Is the opening cross useful in tax loss harvesting when you are trying to avoid wash sales by using not substantially-identical ETF's?

2) Is it useful for buying Foreign ETF's when at least the European markets are open if not Asia?
1) I don't see why it would be useful for that. Maybe a little more detail would help?

2) the opening cross only ensures a zero spread; there is no guarantee made about the size of the discount/premium to NAV (this is always true, not just at the opening cross). See also the discussion on the opening cross in Reducing your ETF Trading Costs. I would say the answer to this is "no".
1) I would think that a large number of orders from professional traders being "averaged out" during the opening cross would tend to reduce any bad pricing in either of the the two positions.

2) Same idea as in 1) with the added benefit that those professionals are also looking at European markets when they submit their orders. Again tending to reduce mis-pricing.

I understand that there is no guarantee on the price/NAV dilemma but I would think that any error on the buy side would be compensated by a similar error on the sell side. :?:
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Re: Case study Broker trade executions

Post by saver007 » Wed Jan 17, 2018 8:54 pm

Interactive Brokers has an order type called split spread which apparently execute at the mid of bid/ask. Anyone tried it?
Commercial for it is pretty interesting/comic :? https://www.youtube.com/watch?v=Jw7QWyN_2Zg

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Re: Case study Broker trade executions

Post by alec » Wed Jan 17, 2018 9:19 pm

saver007 wrote:
Wed Jan 17, 2018 8:54 pm
Interactive Brokers has an order type called split spread which apparently execute at the mid of bid/ask. Anyone tried it?
Commercial for it is pretty interesting/comic :? https://www.youtube.com/watch?v=Jw7QWyN_2Zg
This link seems a little more informative

https://www.interactivebrokers.com/en/index.php?f=26817
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Re: Case study Broker trade executions

Post by ftobin » Wed Jan 17, 2018 10:05 pm

saver007 wrote:
Wed Jan 17, 2018 8:54 pm
Interactive Brokers has an order type called split spread which apparently execute at the mid of bid/ask. Anyone tried it?
All they're doing is passing on a mid-point peg order to the market maker, who re-sends it to an exchange as a midpoint peg. It's not really IB that's providing the order facility -- they're simply passing instructions through to the exchange that already supports this order type.

There are a *lot* of order types that aren't exposed to retail clients, unfortunately.

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Re: Case study Broker trade executions

Post by lazyday » Thu Jan 18, 2018 2:56 am

ftobin wrote:
Wed Jan 17, 2018 5:41 pm
All market makers are going to execute your orders at the opening price of the listing exchange for the security.
And there's only one listing exchange for a security? I guess then my concern would be that my order isn't given to a market maker.

If placing the buy and sell with free trades, I could try it in small batches to reduce risk. I'll report it here, though it may be awhile... I just did a couple in December and early this month, and don't see another in the near future.

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Re: Case study Broker trade executions

Post by ftobin » Thu Jan 18, 2018 10:45 am

lazyday wrote:
Thu Jan 18, 2018 2:56 am
And there's only one listing exchange for a security?
For the securities you'd most likely be trading, yes.
I guess then my concern would be that my order isn't given to a market maker.
If your order is requires someone to pay a fee to access liquidity (which is true for the opening/closing crosses), your broker is going to send it to a market maker since they don't want to pay the fee themselves.

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Re: Case study Broker trade executions

Post by SlowMovingInvestor » Fri Jan 19, 2018 10:52 am

I was selling a small amount of a fairly high volume ETF (around $10,000) at Etrade today, and I had set a limit order for (say) 20.50 over an hour ago.

I jsut checked right now, and the ticker shows the last trade executed at (say) 20.52, but my order was not. I can understand that a limit order placed at 20.50 might not get filled even if the last price is 20.50, but surely it should have been filled if the last price was 20.59 ?

The small amount of differnce is not going to bankrupt me :), but I am curious about market mechanics that would allow a trade to remain unfilled.

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Re: Case study Broker trade executions

Post by triceratop » Fri Jan 19, 2018 10:54 am

SlowMovingInvestor wrote:
Fri Jan 19, 2018 10:52 am
I was selling a small amount of a fairly high volume ETF (around $10,000) at Etrade today, and I had set a limit order for (say) 20.50 over an hour ago.

I jsut checked right now, and the ticker shows the last trade executed at (say) 20.52, but my order was not. I can understand that a limit order placed at 20.50 might not get filled even if the last price is 20.50, but surely it should have been filled if the last price was 20.59 ?

The small amount of differnce is not going to bankrupt me :), but I am curious about market mechanics that would allow a trade to remain unfilled.
Was your order for an odd lot?
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Re: Case study Broker trade executions

Post by SlowMovingInvestor » Fri Jan 19, 2018 10:56 am

triceratop wrote:
Fri Jan 19, 2018 10:54 am
SlowMovingInvestor wrote:
Fri Jan 19, 2018 10:52 am
I was selling a small amount of a fairly high volume ETF (around $10,000) at Etrade today, and I had set a limit order for (say) 20.50 over an hour ago.

I jsut checked right now, and the ticker shows the last trade executed at (say) 20.52, but my order was not. I can understand that a limit order placed at 20.50 might not get filled even if the last price is 20.50, but surely it should have been filled if the last price was 20.59 ?

The small amount of differnce is not going to bankrupt me :), but I am curious about market mechanics that would allow a trade to remain unfilled.
Was your order for an odd lot?
No, but I just realized it was an AON order, which explains it. Still would have expected it to be cleared in a fairly high volume security (FREL).

livesoft
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Re: Case study Broker trade executions

Post by livesoft » Fri Jan 19, 2018 11:05 am

SlowMovingInvestor wrote:
Fri Jan 19, 2018 10:52 am
I was selling a small amount of a fairly high volume ETF (around $10,000) at Etrade today, and I had set a limit order for (say) 20.50 over an hour ago.
That is amazing, but after you replaced without AON set, what happened?

If one watches real-time trades, then the typical size is about 100 to 200 shares, so more than 400 shares would not pop through right away.
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lazyday
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Re: Case study Broker trade executions

Post by lazyday » Fri Jan 19, 2018 11:22 am

ftobin wrote:
Thu Jan 18, 2018 10:45 am
lazyday wrote:
Thu Jan 18, 2018 2:56 am
I guess then my concern would be that my order isn't given to a market maker.
If your order is requires someone to pay a fee to access liquidity (which is true for the opening/closing crosses), your broker is going to send it to a market maker since they don't want to pay the fee themselves.
I don't understand this stuff, but for me to add liquidity, wouldn't I have to place a limit order that is not marketable? That would seem almost impossible to do successfully for the opening cross, especially if trying to buy and sell at the same time.

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alec
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Re: Case study Broker trade executions

Post by alec » Fri Jan 19, 2018 12:15 pm

SlowMovingInvestor wrote:
Fri Jan 19, 2018 10:56 am
triceratop wrote:
Fri Jan 19, 2018 10:54 am
SlowMovingInvestor wrote:
Fri Jan 19, 2018 10:52 am
I was selling a small amount of a fairly high volume ETF (around $10,000) at Etrade today, and I had set a limit order for (say) 20.50 over an hour ago.

I jsut checked right now, and the ticker shows the last trade executed at (say) 20.52, but my order was not. I can understand that a limit order placed at 20.50 might not get filled even if the last price is 20.50, but surely it should have been filled if the last price was 20.59 ?

The small amount of differnce is not going to bankrupt me :), but I am curious about market mechanics that would allow a trade to remain unfilled.
Was your order for an odd lot?

No, but I just realized it was an AON order, which explains it. Still would have expected it to be cleared in a fairly high volume security (FREL).
AON orders are not required to be displayed, so chances are your limit price won’t show up in public quotes, and only your broker or the broker it was sent to know about it.
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Re: Case study Broker trade executions

Post by ftobin » Fri Jan 19, 2018 2:04 pm

alec wrote:
Fri Jan 19, 2018 12:15 pm
AON orders are not required to be displayed, so chances are your limit price won’t show up in public quotes, and only your broker or the broker it was sent to know about it.
There's an even stronger statement: AON orders cannot be displayed (though you might see a principal order representing part of it). Market makers have different procedures on how to acquire shares to flip to an AON. Never place an AON order, though, unless you really, really, really know what you are doing. They're pretty much the most profitable type of order a market maker can get.

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Re: Case study Broker trade executions

Post by ftobin » Fri Jan 19, 2018 2:09 pm

lazyday wrote:
Fri Jan 19, 2018 11:22 am
ftobin wrote:
Thu Jan 18, 2018 10:45 am
lazyday wrote:
Thu Jan 18, 2018 2:56 am
I guess then my concern would be that my order isn't given to a market maker.
If your order is requires someone to pay a fee to access liquidity (which is true for the opening/closing crosses), your broker is going to send it to a market maker since they don't want to pay the fee themselves.
I don't understand this stuff, but for me to add liquidity, wouldn't I have to place a limit order that is not marketable? That would seem almost impossible to do successfully for the opening cross, especially if trying to buy and sell at the same time.
I was making a general statement of all types of orders. If handling your order would cost the broker money, they're going to pass it onto a market maker. Since most if not all of the NMS exchanges charge for open/cross participation (they effectively have a monopoly), your order will assuredly be given to a market maker.

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Re: Case study Broker trade executions

Post by SlowMovingInvestor » Fri Jan 19, 2018 3:13 pm

ftobin wrote:
Fri Jan 19, 2018 2:04 pm
alec wrote:
Fri Jan 19, 2018 12:15 pm
AON orders are not required to be displayed, so chances are your limit price won’t show up in public quotes, and only your broker or the broker it was sent to know about it.
There's an even stronger statement: AON orders cannot be displayed (though you might see a principal order representing part of it). Market makers have different procedures on how to acquire shares to flip to an AON. Never place an AON order, though, unless you really, really, really know what you are doing. They're pretty much the most profitable type of order a market maker can get.
Thanks for the info. This is an account where I do have to pay commissions, I've had situations before where only small parts of orders were filled (orders valid for a day), so it's annoying to pay multiple commissions (if I change the price or it expires). I'm not much of an active trader, so the commissions don't reallly matter that much -- just constituional thriftiness on my part to use AON in such accounts when possible :)

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Re: Case study Broker trade executions

Post by Caduceus » Sat Jan 20, 2018 4:40 am

Can brokers keep inventory for themselves and earn by selling to their own clients? Is this legal? For example, since Fidelity can obviously see its own entire limit order book, if it sees that there's a huge demand for XXX at $30, currently trading at $31. If the stock goes down to $29, can Fidelity buy up the entire block for itself, then re-sell the shares for a $1 profit to the limit orders at $30?

This isn't going to work with extremely liquid stocks, but with thinly traded stocks, I've often wondered if brokers "skim" the trades against the interests of their clients.

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Re: Case study Broker trade executions

Post by ftobin » Sat Jan 20, 2018 6:29 am

Caduceus wrote:
Sat Jan 20, 2018 4:40 am
Can brokers keep inventory for themselves and earn by selling to their own clients? Is this legal? For example, since Fidelity can obviously see its own entire limit order book, if it sees that there's a huge demand for XXX at $30, currently trading at $31. If the stock goes down to $29, can Fidelity buy up the entire block for itself, then re-sell the shares for a $1 profit to the limit orders at $30?
If you have a buy order with Fidelity, they cannot buy at a price equal or lower than your price without giving you the shares.

But they can certainly sell to you, which is generally to your benefit.

In your story, your limit orders at $30 would executed anyways if the stock was at $29.

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Re: Case study Broker trade executions

Post by Tanelorn » Sat Jan 20, 2018 8:27 am

ftobin wrote:
Sat Jan 20, 2018 6:29 am
If you have a buy order with Fidelity, they cannot buy at a price equal or lower than your price without giving you the shares.

But they can certainly sell to you, which is generally to your benefit.

In your story, your limit orders at $30 would executed anyways if the stock was at $29.
Could this be an example of a situation where an AON order might get filled at a worse price than $30 when the broker or market maker bought the shares for $29?

In non-NMS markets like bonds, I think it's also possible that the broker may keep inventory or buy up orders at $29 only to flip them to customers at $30.

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Re: Case study Broker trade executions

Post by Caduceus » Sat Jan 20, 2018 8:56 am

ftobin wrote:
Sat Jan 20, 2018 6:29 am
Caduceus wrote:
Sat Jan 20, 2018 4:40 am
Can brokers keep inventory for themselves and earn by selling to their own clients? Is this legal? For example, since Fidelity can obviously see its own entire limit order book, if it sees that there's a huge demand for XXX at $30, currently trading at $31. If the stock goes down to $29, can Fidelity buy up the entire block for itself, then re-sell the shares for a $1 profit to the limit orders at $30?
If you have a buy order with Fidelity, they cannot buy at a price equal or lower than your price without giving you the shares.

But they can certainly sell to you, which is generally to your benefit.

In your story, your limit orders at $30 would executed anyways if the stock was at $29.
Thanks Ftobin. Yes, it makes sense that brokers with their own inventory can always sell to clients. But I am thinking specifically of thinly traded securities. For example, I place limit order of 10,000 shares for $30, with stock currently at $31. A pair of transactions takes place at $30 and I don't get filled (the order was placed before mine.) Next spread is $29-$30, and with 4,000 ask paired with my 10,000 bid. If I'm reading you right, Fidelity is not allowed to buy the next block of 4,000 shares at $29, and then turn around the next second and sell the same block of 4,000 shares to me at $30.

If that's the case, then how do brokers "front-run" their clients? I've read various finance articles which say that placing large limit orders (esp. for institutions) runs the risk of front-running by brokers. How would that happen then?

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Re: Case study Broker trade executions

Post by livesoft » Sat Jan 20, 2018 9:06 am

There are dark pools, high frequency traders, order selling, and deals to let others see orders before they get listed on an exchange.

But since you didn't say whether order was a buy or sell, I couldn't follow your numbers.

For the past 2 days I never got fills on some limit orders to buy set at the bid even though many orders were filled at that price. The volume was about a million shares at the end of the day, so not thinly traded. I am thinking collusion is why my orders did not execute.
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Re: Case study Broker trade executions

Post by jhfenton » Sat Jan 20, 2018 9:21 am

livesoft wrote:
Sat Jan 20, 2018 9:06 am
I am thinking collusion is why my orders did not execute.
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