Case study Broker trade executions

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GrowthSeeker
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Re: Case study Broker trade executions

Post by GrowthSeeker » Thu Jan 03, 2019 7:42 pm

jhfenton wrote:
Thu Jan 03, 2019 7:19 pm
livesoft wrote:
Thu Jan 03, 2019 4:14 pm
Ha! Ha! I can get guess that they were thinking: What's going on today? We never have this much volume at the open. Let's take a closer look. :)

Moral: Use different brokers for each side of the trade.
Ha. That would work too. :beer

I wondered after the call whether it would make a difference if my wife put in the trade in her IRA using her login or if they simply lump all family accounts together regardless for the self-trading rule. They seemed to know that I made both trades, even though the buy was in her IRA and the sale was in my IRA.
Would Vanguard allow you to swap fund shares from your IRA with an equivalent amount cash from her IRA? I doubt that is something they do, but maybe it is. If not, then why is it a problem for you to do what you did?
Just because you're paranoid doesn't mean they're NOT out to get you.

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Re: Case study Broker trade executions

Post by Doc » Thu Jan 03, 2019 8:01 pm

GrowthSeeker wrote:
Thu Jan 03, 2019 7:42 pm
Would Vanguard allow you to swap fund shares from your IRA with an equivalent amount cash from her IRA? I doubt that is something they do, but maybe it is. If not, then why is it a problem for you to do what you did?
Depending on the details. I can make the swap from joint to my ROTH. But that is not the issue here. This is about trades on the stock market not about mutual funds.
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Re: Case study Broker trade executions

Post by vineviz » Thu Jan 03, 2019 8:30 pm

livesoft wrote:
Sun Mar 25, 2018 11:49 am
lazyday wrote:
Sun Mar 25, 2018 11:45 am
It sounds like there is no disadvantage to using a marketable limit order, instead of a market order?
I think the disadvantage would be that you would pay the full spread more often than not.
If you're a retail investor, you're always paying the prevailing spread.
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ftobin
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Re: Case study Broker trade executions

Post by ftobin » Thu Jan 03, 2019 8:56 pm

vineviz wrote:
Thu Jan 03, 2019 8:30 pm
If you're a retail investor, you're always paying the prevailing spread.
Generally not. Usually the broker is going to give significant price improvement. There is extreme competition at this level. Many times when I've bought an oddlot I've paid the bid price.

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livesoft
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Re: Case study Broker trade executions

Post by livesoft » Thu Jan 03, 2019 9:06 pm

@ftobin, thanks for dropping in and continuing with the myth-busting which is what this entire thread is all about. :beer
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jhfenton
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Re: Case study Broker trade executions

Post by jhfenton » Fri Jan 04, 2019 9:35 am

ftobin wrote:
Thu Jan 03, 2019 8:56 pm
vineviz wrote:
Thu Jan 03, 2019 8:30 pm
If you're a retail investor, you're always paying the prevailing spread.
Generally not. Usually the broker is going to give significant price improvement. There is extreme competition at this level. Many times when I've bought an oddlot I've paid the bid price.
+1 I usually (but not always) get mid-spread execution on small odd lot market orders.

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Re: Case study Broker trade executions

Post by jhfenton » Fri Jan 04, 2019 9:37 am

For what it's worth, VFVA (Vanguard US Value Factor ETF) traded over 8,000 shares at the open today, so my swap would have gone unremarked if done today. (But it's probably not anything I will ever need to do again with VFVA.)

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Re: Case study Broker trade executions

Post by vineviz » Fri Jan 04, 2019 10:12 am

ftobin wrote:
Thu Jan 03, 2019 8:56 pm
vineviz wrote:
Thu Jan 03, 2019 8:30 pm
If you're a retail investor, you're always paying the prevailing spread.
Generally not. Usually the broker is going to give significant price improvement. There is extreme competition at this level. Many times when I've bought an oddlot I've paid the bid price.
I might argue that price improvement by my broker is accounted for in the "prevailing spread", which may be less than the "quoted spread", but I'm not sure it's that important.

In any case, I was probably less precise than I should have been. The point I was trying to make is that there are no strategies the retail investor can undertake that will impact the prevailing spread or where, within that spread, their trade will execute. My brokers willingness and ability to provide price improvement is an exogenous factor as far as I'm concerned, and not something I can control except for preventing it by entering a non-marketable limit order.
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Re: Case study Broker trade executions

Post by Doc » Fri Jan 04, 2019 11:36 am

Probably not relevant but last Friday I placed a market order to sell 200 shares of a very liquid stock and got a "Price Improvement" of $0.72. :D

Obviously not a significant amount but nevertheless the price was better than the bid. The typical spread on this security is $0.01.
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alec
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Re: Case study Broker trade executions

Post by alec » Sat Jan 05, 2019 5:41 pm

jhfenton wrote:
Thu Jan 03, 2019 4:10 pm
jhfenton wrote:
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.)
jhfenton wrote:
Tue Jan 16, 2018 10:59 am
Result: You can do the opening cross swap with limit orders, as long as you make them wide enough that both sides execute.
Doc wrote:
Tue Jan 16, 2018 11:20 am
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
I did this yesterday with a lower volume ETF, VFVA, to effectively consolidate positions in two accounts into one. I sold 374 shares of VFVA in one account (my IRA) and bought 374 shares of VFVA in another account (my wife's IRA) at the open at $63.31. Everything went smoothly. As always, I used my login for everything.

But...because there were only 600+ shares traded at the open, I did actually trade with myself. So I got a friendly call from Vanguard's trade desk today suggesting that I not trade with myself again because it violates an SEC rule. (They really were friendly.) If I were to do it again, they might cancel one side of the paired trades. (I should have asked for the exact rule so I could read it. I'll have to do some research.)

Moral: Trading in opposite directions at the opening cross to swap shares is fine, but it needs to be in a liquid enough security that your shares are not a majority of those that trade at the open.
Yeah, I’d ask what the exact rule is because you weren’t doing it to creat a loss for tax purposes.
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Re: Case study Broker trade executions

Post by jhfenton » Sat Jan 05, 2019 6:33 pm

alec wrote:
Sat Jan 05, 2019 5:41 pm
Yeah, I’d ask what the exact rule is because you weren’t doing it to creat a loss for tax purposes.
He said it was an SEC rule, but the only relevant thing I can find is an SEC approval of a FINRA rule relating to self trades (PDF). But if that's what they're applying, it seems to be a misapplication to my situation, since there was, in fact, a beneficial change in ownership of the securities (i.e., my IRA to my wife's IRA). Just because I entered both orders doesn't make it a self trade.

If I ever have reason to do one of these swaps again, I'll make sure my wife enters her own order using her login.

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Re: Case study Broker trade executions

Post by livesoft » Sat Jan 05, 2019 6:39 pm

Years ago, I did something similar, but between two brokers and not for the exact same number of shares. Here are the screen captures:
viewtopic.php?p=1488409#p1488409

As I recall, I was chastised at the time that this was probably not kosher by another forum member.
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Re: Case study Broker trade executions

Post by jhfenton » Mon Feb 04, 2019 12:57 pm

livesoft wrote:
Sat Jan 05, 2019 6:39 pm
Years ago, I did something similar, but between two brokers and not for the exact same number of shares. Here are the screen captures:
viewtopic.php?p=1488409#p1488409

As I recall, I was chastised at the time that this was probably not kosher by another forum member.
I made another swap this morning between my Fidelity HSA and my wife's Roth IRA.

I had 945 shares of EMGF (iShares EDGE Multifactor ETF) in my HSA that I had transferred from Lively/TD Ameritrade, and I wanted to move it into Fidelity's 8 bp EM index fund (FPADX). (That will simplify my HSA down to just the one holding.) On the Vanguard side, I wanted to buy those same 945 shares of EMGF and sell enough VEMAX (Vanguard EM Index Admiral) to pay for it.

A few minutes before the market opened, I placed a Buy Limit order for 945 shares of EMGF at Vanguard at $44.00. At the same time, I placed a Sell Limit order for 945 shares of EMGF at Fidelity at $42.00. (The closing price on Friday was $43.07, and I expected it to open slightly down.) Both trades executed at $42.82.

The net effect is swapping VEMAX at 14 bp for FPADX at 8 bp. I'm out $4.95 on the trade and the SEC fee, but I will more than make the SEC fee back on the Vanguard side of the trade with 1 day's money market interest on $40K. I was going to have to pay the $4.95 to sell the EMGF at some point anyway.

I don't have any more swapping to do at this point. I've consolidated and simplified everything as much as I can. (At least until one of our 401(k)s changes investment options again. That can trigger some shuffling around.)

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Re: Case study Broker trade executions

Post by livesoft » Mon Feb 04, 2019 2:16 pm

And I tried something today. I need to buy some Total US Bond fund, so I submitted a limit order to buy SPAB. Then I looked a few hours later at the one-day chart at finance.yahoo.com which suggested a 1.45 M share trade well below my limit price at 11:03 am:

Image

So I thought: "Happy! Happy! Joy! Joy!" until I looked at my order which did not execute.

Then I looked again an hour later and that low spike is gone from the intra-day chart. So somewhere a bad bit of data crept in and got disseminated.
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Re: Case study Broker trade executions

Post by jhfenton » Mon Feb 04, 2019 7:33 pm

livesoft wrote:
Mon Feb 04, 2019 2:16 pm
So I thought: "Happy! Happy! Joy! Joy!" until I looked at my order which did not execute.

Then I looked again an hour later and that low spike is gone from the intra-day chart. So somewhere a bad bit of data crept in and got disseminated.
Did your order ever execute? I still see the 11:03 AM 1.45MM share trade at 27.92 on Yahoo! Finance, but I don't see it on a Google chart.

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Re: Case study Broker trade executions

Post by livesoft » Mon Feb 04, 2019 8:00 pm

No, my order did not execute.
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Re: Case study Broker trade executions

Post by livesoft » Thu Feb 14, 2019 11:24 am

So another interesting-to-me trade execution:

Image

I submitted a limit order to sell VSS this morning in a Vanguard account. It was executed at 101.33 which is reflected in the chart above. But the "Day's Range" at finance.yahoo.com shows high so far was 101.29. (And yes, Vanguard says the trade executed at the time shown on the chart.)
Morningstar.com, Vanguard.com, and TDAmeritrade have the Day's high as 101.33.

Conclusion: Watch out where you get your data from.
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ftobin
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Re: Case study Broker trade executions

Post by ftobin » Thu Feb 14, 2019 2:07 pm

livesoft wrote:
Thu Feb 14, 2019 11:24 am
I submitted a limit order to sell VSS this morning in a Vanguard account. It was executed at 101.33 which is reflected in the chart above. But the "Day's Range" at finance.yahoo.com shows high so far was 101.29. (And yes, Vanguard says the trade executed at the time shown on the chart.)
Morningstar.com, Vanguard.com, and TDAmeritrade have the Day's high as 101.33.
Often times calculations will ignore oddlots. Was your execution >= 100 shares?

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Re: Case study Broker trade executions

Post by livesoft » Thu Feb 14, 2019 3:19 pm

ftobin wrote:
Thu Feb 14, 2019 2:07 pm
Often times calculations will ignore oddlots. Was your execution >= 100 shares?
Yes, > 200 shares, but not a multiple of 100.
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Re: Case study Broker trade executions

Post by livesoft » Fri Feb 15, 2019 11:43 am

Yesterday, I bought VSS at another broker and sold VSS in a Vanguard account at a higher price. Yep, day trading. But now to the matter at hand:

The Vanguard web site did not show the trade under the "Activity" tab in real-time nor in "hours delayed time", so that's a failure. It took an overnight run to update information. Unacceptable. [Update: Just got an e-mail more than 31 hours after execution from Vanguard: "Notice of a brokerage order execution." It is so old that this is double unacceptable.]

Today I wish to give another example of how bad Vanguard Brokerage Services is. I want to use the money from selling VSS yesterday to buy VFSAX. So I log into Vanguard.com and see:

Image

That is, the web site shows incorrect information. Not to be deterred, I try to buy more VFSAX anyways. Since I already own shares, I click on the "Buy" on the line next to those shares and get:

Image

This is an IRA which has money from the sale of VSS yesterday, but where is it? And how much is it? The above screen capture gives me no clue. So I put $20,000, click continue, and get:

Image

Now I see that I have $20,861.17 available and thus change the previously entered $20,000 to $20,861.17 and submit the buy transaction. I suspect that on Tuesday, I will still have a little cash turd left in the settlement account and will have to make another transaction to zero out the turd. I will update this thread at that time.

(And I will sell VSS in the other brokerage account near the close of the market today, so that over the past few days my position in VFSAX/VFSVX/VSS is maintained.)
Last edited by livesoft on Fri Feb 15, 2019 6:53 pm, edited 1 time in total.
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Re: Case study Broker trade executions

Post by Doc » Fri Feb 15, 2019 12:21 pm

livesoft wrote:
Fri Feb 15, 2019 11:43 am
Now I see that I have $20,861.17 available ...
I think I had a similar type of thing at either Schwab of Fidelity in the last few days. The amount available from a recent (same day) trade didn't show up in the balance anywhere. But if you attempted to make a trade using these invisible funds the correct amount did show up as "available to trade" on the buy screen.
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Re: Case study Broker trade executions

Post by bondsr4me » Fri Feb 15, 2019 12:21 pm

livesoft wrote:
Fri Feb 15, 2019 11:43 am
Yesterday, I bought VSS at another broker and sold VSS in a Vanguard account at a higher price. Yep, day trading. But now to the matter at hand:

The Vanguard web site did not show the trade under the "Activity" tab in real-time nor in "hours delayed time", so that's a failure. It took an overnight run to update information. Unacceptable.

Today I wish to give another example of how bad Vanguard Brokerage Services is.

Just curious (and I mean this sincerely and not as a poke in the eye at ya)

Why do you use Vanguard?
Are you moving away from Vanguard?

As I say, just curious.

Thanks Livesoft.

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Re: Case study Broker trade executions

Post by retiringwhen » Fri Feb 15, 2019 12:23 pm

It really does seem like their system has glitches just about everywhere (I just was convinced of the errors in Tax Center today in another thread). As to the cash turds, is that a Vanguard specific thing? it would seem like the broker could pull forward accrued interest if you sell all of your settlement account, but they don't seem to do that for the settlement account (it does work for MM funds that are the settlement)

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Re: Case study Broker trade executions

Post by livesoft » Fri Feb 15, 2019 12:30 pm

bondsr4me wrote:
Fri Feb 15, 2019 12:21 pm
Just curious (and I mean this sincerely and not as a poke in the eye at ya)

Why do you use Vanguard?
Are you moving away from Vanguard?

As I say, just curious.

Thanks Livesoft.
Good question. I am not moving away from Vanguard mostly because I want to have experiences like today's to create posts on this forum of Vanguard Diehards. :twisted:

I have had a Vanguard account for more than 35 years. I like their bond mutual funds better than I like bond ETFs. With today's transaction, I will have no ETFs at Vanguard any longer and only 3 mutual funds with one single fund per account. I should have no need whatsoever to make any transactions in the next 10 years at Vanguard.com. With no need to make transactions in these funds, there is no need to even transfer them in-kind to another brokerage firm. I will not sell the shares in the taxable account because of the taxes that we would have to pay on that.
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Re: Case study Broker trade executions

Post by bondsr4me » Fri Feb 15, 2019 12:37 pm

livesoft wrote:
Fri Feb 15, 2019 12:30 pm
bondsr4me wrote:
Fri Feb 15, 2019 12:21 pm
Just curious (and I mean this sincerely and not as a poke in the eye at ya)

Why do you use Vanguard?
Are you moving away from Vanguard?

As I say, just curious.

Thanks Livesoft.
Good question. I am not moving away from Vanguard mostly because I want to have experiences like today's to create posts on this forum of Vanguard Diehards. :twisted:

I have had a Vanguard account for more than 35 years. I like their bond mutual funds better than I like bond ETFs. With today's transaction, I will have no ETFs at Vanguard any longer and only 3 mutual funds with one single fund per account. I should have no need whatsoever to make any transactions in the next 10 years at Vanguard.com. With no need to make transactions in these funds, there is no need to even transfer them in-kind to another brokerage firm. I will not sell the shares in the taxable account because of the taxes that we would have to pay on that.
Thanks Livesoft!
I knew you had a logical explanation!!
I agree with you about the bond funds vs etf's.
In that case, I do think there is some value to having an "active" manager.
Appreciate your answer.

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Re: Case study Broker trade executions

Post by livesoft » Sat Sep 14, 2019 9:01 am

From: viewtopic.php?p=4748598#p4748598
Bogle64Pilot wrote:
Sat Sep 14, 2019 8:35 am
[...] Just to follow back up I completed my order a couple of weeks ago. The 15,000+ shares of ITOT I purchased at the limit price executed in one 10,000 block and then 3 other blocks within a minute.

I also called Fidelity and asked about the block trading desk for my execution and they said they don’t create blocks less than 100,000 shares which would be a $6.4M purchase at the date of my order.
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Re: Case study Broker trade executions

Post by AlohaJoe » Thu Sep 19, 2019 11:14 pm

A few of my own recent trades from some tax loss harvesting to add to livesoft's growing collection of case studies. All of these were single market orders. Many Bogleheads seem to be scared of those, so consider this a small piece of evidence that even with reasonably decent sized trades they're not so scary.

On 8/19 buy $300,000 of MUB (2,676 shares). Filled instantly and no "market impact". MUB trades $87 million a day, so no surprise that my 0.3% of the total daily volume filled instantly with no dramas.

Bogleheads are also afraid of "illiquid" and "low volume" ETFs.

On 8/16 sold $100,000 of RZV. RZV only trades $1.1 million a day, so that was 10% of the average daily volume. It took about 8 minutes to fill the market order (about half quickly, then a pause for a few minutes, then the rest). At that point in the day (11am) I think under 1,000 shares had traded, so my sell order for 1800 was actually more than had traded all day up to that point.

On 8/15 sold $200,000 of VFMF. VFMF only trades $400,000 a day, so that was 50% of the average daily volume. The order filled in under 3 minutes.

FWIW, both RZV and VFMF were sold at a (slight) premium to NAV. (Not that I think premium/discount to NAV is especially meaningful.)

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Re: Case study Broker trade executions

Post by lazyday » Mon Sep 23, 2019 9:25 am

In the real world, what happens when a sizable market order is placed to sell a thinly traded ETF?

We might expect the trade to execute almost instantly at a terrible price. But maybe brokers have a duty to step in to reduce the customer’s pain, trying to get closer to a fair price even if this causes a delay? Or maybe some brokerage agreements allow the broker to do this if the broker chooses to?
AlohaJoe wrote:
Thu Sep 19, 2019 11:14 pm
sold $100,000 of RZV … that was 10% of the average daily volume. It took about 8 minutes to fill the market order …. a (slight) premium to NAV
I’ve noticed many intelligent and thoughtful posts from you over the years. I don’t know how to reconcile that with what seems to me a reckless and possibly foolish act. I don’t know much about trading, maybe it’s not as risky as I think. Personally, I’d rather avoid a chance to be unlucky, if it’s easy to do so. Such as with a marketable limit order, or several smaller market orders.

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Re: Case study Broker trade executions

Post by vineviz » Mon Sep 23, 2019 9:33 am

lazyday wrote:
Mon Sep 23, 2019 9:25 am
In the real world, what happens when a sizable market order is placed to sell a thinly traded ETF?

We might expect the trade to execute almost instantly at a terrible price.
This is not necessarily a reasonable expectation, because the trading volume of the ETF itself is irrelevant to speed and price (relative to the prevailing bid/ask for the ETF) of the trade execution.

What matters is the liquidity of the underlying securities: if they are liquid, the hypothetical "sizable market order ... to sell a thinly traded ETF" will execute more-or-less immediately at or above the bid price at the time the order is submitted.

Here's an example in which I entered a market buy order for 300% of the average daily volume of an ETF.
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Re: Case study Broker trade executions

Post by AlohaJoe » Mon Sep 23, 2019 4:43 pm

lazyday wrote:
Mon Sep 23, 2019 9:25 am
In the real world, what happens when a sizable market order is placed to sell a thinly traded ETF?

We might expect the trade to execute almost instantly at a terrible price. But maybe brokers have a duty to step in to reduce the customer’s pain, trying to get closer to a fair price even if this causes a delay? Or maybe some brokerage agreements allow the broker to do this if the broker chooses to?
AlohaJoe wrote:
Thu Sep 19, 2019 11:14 pm
sold $100,000 of RZV … that was 10% of the average daily volume. It took about 8 minutes to fill the market order …. a (slight) premium to NAV
I’ve noticed many intelligent and thoughtful posts from you over the years. I don’t know how to reconcile that with what seems to me a reckless and possibly foolish act. I don’t know much about trading, maybe it’s not as risky as I think. Personally, I’d rather avoid a chance to be unlucky, if it’s easy to do so. Such as with a marketable limit order, or several smaller market orders.
That trade was the result of several years of gradual experimentation and increasing comfort with ETFs. Believe me, when I did my first trade I set a limit order and refreshed the order status every 3 seconds anxiously wondering what I had messed up. I think part of livesoft's goal with this thread is to help reduce that anxiety for people stepping into the great unknown of ETFs.

Once reason I have had increasing comfort with market orders with thinly traded ETFs is simply the result of using limit orders and having to deal with the sometimes unpleasant and unexpected consequences. Say I am, unfortunately, in the position of needing to do some tax loss harvesting. I have $100,000 in proceeds from the sell of another security and want to add to my holding. The bid-ask is 64.30-64.40. I put in a "marketable limit order" of 64.32. Guess what. It doesn't execute. There's no rule of the universe saying it has to, despite what Vanguard's "how to trade ETFs" document might imply. Then, after a few minutes, the market has moved. Now the bid-ask is 64.35-64.45 and my order at 64.32 is squarely in a "it will never execute" spot. What do you do? Cancel the order? Make another one at 64.37 and hope that one executes? But if I am happy to accept 64.37 as a price...why didn't I just put that in in the first place?

After having gone through various permutations:

- Trying splitting the order up into (much) smaller amounts, say, $5,000 and space the buys over several days. Of course, then you're out of the market for several days and risk the market moving against you. (Hint: it has moved against me repeatedly.)
- Just leave the order and hope the market moves back down and it eventually gets executed. (Hint: it has often never moved down, leaving my order to expire, if a Good Till Close, or just languish for days until I cancelled it myself.)
- Continually chase the daily movement with so-called "marketable limit orders" that often fail to execute, leaving me to issue a new order an hour later at a higher price. Oh, and I have to stay near a computer and continually refresh things to see what's happening.

The reality is that, as far as I can tell from my experiments, you can buy essentially infinite amounts of any ETF at its "ask" price and sell infinite amounts at the "bid" price because some market maker or hedge fund (Interactive Brokers shows you where the trade executes and I see a ton of DARK POOL) will step in and execute.

So at the end of the day the question is about whether you execute at the edge of the bid-ask or somewhere in between. Many people, many Bogleheads, feel very strongly that if you pay the bid-ask then Wall Street is winning and you are losing and lose a lot of sleep over ever letting that happen. I see it as: they provided me a service. I got instant liquidity. And, realistically (I've run the numbers), paying a few cents more or less (even on a 6-figure order) the few times I trade makes no difference over my 70-year investing life.

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livesoft
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Re: Case study Broker trade executions

Post by livesoft » Mon Sep 23, 2019 4:48 pm

AlohaJoe wrote:
Mon Sep 23, 2019 4:43 pm
[...] Say I am, unfortunately, in the position of needing to do some tax loss harvesting. I have $100,000 in proceeds from the sell of another security and want to add to my holding. The bid-ask is 64.30-64.40. I put in a "marketable limit order" of 64.32. Guess what. It doesn't execute.
If that was a buy order, then that 64.32 is not a marketable limit order. It would have to be at least 64.40 to be a marketable limit order to buy.

If that was a sell order, then that 64.32 is not a marketable limit order. It would have to be no more than 64.30 to be a marketable limit order to sell.
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AlohaJoe
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Re: Case study Broker trade executions

Post by AlohaJoe » Mon Sep 23, 2019 4:54 pm

livesoft wrote:
Mon Sep 23, 2019 4:48 pm
AlohaJoe wrote:
Mon Sep 23, 2019 4:43 pm
[...] Say I am, unfortunately, in the position of needing to do some tax loss harvesting. I have $100,000 in proceeds from the sell of another security and want to add to my holding. The bid-ask is 64.30-64.40. I put in a "marketable limit order" of 64.32. Guess what. It doesn't execute.
If that was a buy order, then that 64.32 is not a marketable limit order. It would have to be at least 64.40 to be a marketable limit order to buy.

If that was a sell order, then that 64.32 is not a marketable limit order. It would have to be no more than 64.30 to be a marketable limit order to sell.
Quite right, I was lazy when I made up numbers :). When I actually entered such orders last year, they were the definition of "marketable limit order" and failed to execute.

lazyday
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Re: Case study Broker trade executions

Post by lazyday » Tue Sep 24, 2019 8:43 am

AlohaJoe wrote:
Mon Sep 23, 2019 4:54 pm
When I actually entered such orders last year, they were the definition of "marketable limit order" and failed to execute.
This is also an interesting data point. I would have expected at least a partial execution.

I haven’t tried many marketable limit orders yet.
AlohaJoe wrote:
Mon Sep 23, 2019 4:43 pm
The reality is that, as far as I can tell from my experiments, you can buy essentially infinite amounts of any ETF at its "ask" price and sell infinite amounts at the "bid" price... (Interactive Brokers shows you where the trade executes and I see a ton of DARK POOL)....
The fact that it took 8 minutes for a market order to execute gives me pause. Not that I can’t wait 8 minutes, I just wonder if that’s a sign that such a trade could go bad if you’re unlucky someday.

I think grabiner has posted about noticing other traders’ bad trades in the ETF VSS, but can’t find with a quick search.

While I haven’t often traded significantly more shares of a thinly traded ETF than bid or asked, when I have, I’ve typically split into several market orders at the size of the bid or ask. Instead of trading over several days, I usually traded over several minutes. (For non-ETF stocks, I’ve split trades over a long time period such as days.)

Next time my plan is to try marketable limit orders.

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vineviz
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Re: Case study Broker trade executions

Post by vineviz » Tue Sep 24, 2019 8:53 am

lazyday wrote:
Tue Sep 24, 2019 8:43 am
AlohaJoe wrote:
Mon Sep 23, 2019 4:54 pm
When I actually entered such orders last year, they were the definition of "marketable limit order" and failed to execute.
This is also an interesting data point. I would have expected at least a partial execution.
I'm only conjecturing, but my guess is that the limit was right at the bid or ask and normal market volatility moved the price away from him for a few minutes.

The safer approach is probably to set the limit price slightly outside the bid/ask spread. Often just $0.01 is enough, but $0.02 or $0.03 might be preferable if the ETF volatility is high.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Case study Broker trade executions

Post by AlohaJoe » Tue Sep 24, 2019 4:26 pm

vineviz wrote:
Tue Sep 24, 2019 8:53 am
lazyday wrote:
Tue Sep 24, 2019 8:43 am
AlohaJoe wrote:
Mon Sep 23, 2019 4:54 pm
When I actually entered such orders last year, they were the definition of "marketable limit order" and failed to execute.
This is also an interesting data point. I would have expected at least a partial execution.
I'm only conjecturing, but my guess is that the limit was right at the bid or ask and normal market volatility moved the price away from him for a few minutes.

The safer approach is probably to set the limit price slightly outside the bid/ask spread. Often just $0.01 is enough, but $0.02 or $0.03 might be preferable if the ETF volatility is high.
It has been well over a year, probably almost 2 years now, and my memory isn't what it used to be 8-) but I'm guessing you are correct, it was either at or $0.01 off. And you're right if I had tried $0.05 it would probably have worked for me. But at that point (remember this came as a result of months of gradual trial & error, I don't trade that often!) I had a fair amount of confidence that nothing bad was going to happen if I placed a market order. There wasn't going to be a flash crash (and the exchange would bust any trades if that did happen) and there just isn't any real benefit for the market makers to let anyone get screwed by wild orders (this is especially true if your broker is selling deal flow because then they know you're a dumb retail trader and not out to screw them with some proprietary information, so they are willing to provide as much liquidity as you want).

I don't pretend to know what prices are right & wrong -- and I'm willing to live with/ignore intrad-day volatility -- so I'm willing to take what the market gives me, so I just don't see any real point to marketable limit orders. Using marketable limit orders seem to imply that a person can look at a failed order and then somehow know (based on what?) whether they should just re-enter the order with a new limit or wait (for what? for what how long?) for markets to go back to "normal" (whatever that means).

All of which seems to go against what Bogleheads believe & preach in most other circumstances.

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grabiner
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Re: Case study Broker trade executions

Post by grabiner » Tue Sep 24, 2019 6:43 pm

lazyday wrote:
Tue Sep 24, 2019 8:43 am
I think grabiner has posted about noticing other traders’ bad trades in the ETF VSS, but can’t find with a quick search.
Here is the thread:
I bought VSS; spread has been consistently very small

My own posts in 2009 and 2014 both include examples in which a market order at the wrong time could have cost me badly, but I wound up making a trade in a small spread with a limit order (marketable order into a six-cent spread in 2009, inside-the-spread order in 2014 which someone else took in a nine-cent spread).

The daily chart is no longer available, but the posts on April 8, 2009 describe someone else's trade which was more than $2 above any other trade that day. And my next-to-last post on that thread describes a morning in 2014 in which someone bought at 96.33 in a 96.31-96.33 spread, and a few minutes later, someone else bought at 96.90 with an impatient market order.

Even in more recent years, I have sometimes seen one-dollar spreads in VSS when the market opened (often with no trades in the opening cross, so a market order in either direction would have been the only trade in the cross and would have eaten the spread).
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Re: Case study Broker trade executions

Post by overthought » Mon Sep 30, 2019 10:01 am

I normally buy with Limit-at-bid (which can take some time to go through and there's always the risk it doesn't go through at all). Based on this thread, I decided to experiment with a Market buy order of 401 shares SPAB, instead.

Before and after the trade, NAV was 29.57, BID 29.57, ASK 29.58

The buy executed instantly at 29.57 -- nice!

Broker is TDA

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ftobin
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Re: Case study Broker trade executions

Post by ftobin » Tue Oct 15, 2019 3:15 pm

If you're setting your buy limit price at the prevailing bid (or sell at the offer), it's not the broker who is getting you the fill. Your order will have just been posted on an exchange. Your order just sits there. To get your execution, someone selling is crossing the spread to sell.

And more than likely, if you post at the bid, and you end up getting filled, it's because the market is moving down, and what you executed at is the new offer. In other words, you bought high, and the market is now low.

In general, it's highly to your advantage to buy at the current offer, due to the price improvement you'll get.

ma21n2
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Re: Case study Broker trade executions

Post by ma21n2 » Mon Dec 23, 2019 10:09 pm

I only trade in very liquid ETFs such as VTI, SCHB, ITOT, etc. Most of my trades are odd lot orders because I contribute a set amount to Merrill Edge from every paycheck and buy ETFs. Sometimes I do trade a large number of shares — when I rebalance or tax loss harvest.

I read through the entire thread, and it seems to me I should just use a market order all the time with these liquid ETFs, regardless of the number of shares. Also, no need to break up, e.g., 107 share sell order into 100 and 7 share sell orders. I’d get a better price this way in general. Does this sound like a reasonable approach?

Separately, I do have about 50 individual S&P 500 stocks that I need to liquidate. Wealthfront bought them for me earlier this year, but I don’t use Wealthfront anymore. I have 1-3 shares of each stock. Does the same rule apply here? Just use a market order when I sell all of them? (I will in a few months once all gains become long term)

Thanks!

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livesoft
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Re: Case study Broker trade executions

Post by livesoft » Mon Dec 23, 2019 10:36 pm

^Personally, I think a market order in those situations would be perfectly reasonable as long as it was say 30 minutes after the market open, but even before that it probably be OK. I would guess the bid/ask spread would be 1 cent at most in such situations for such ticker symbols.
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Re: Case study Broker trade executions

Post by stlutz » Mon Dec 23, 2019 10:37 pm

ma21n2 wrote:
Mon Dec 23, 2019 10:09 pm
I only trade in very liquid ETFs such as VTI, SCHB, ITOT, etc. Most of my trades are odd lot orders because I contribute a set amount to Merrill Edge from every paycheck and buy ETFs. Sometimes I do trade a large number of shares — when I rebalance or tax loss harvest.

I read through the entire thread, and it seems to me I should just use a market order all the time with these liquid ETFs, regardless of the number of shares. Also, no need to break up, e.g., 107 share sell order into 100 and 7 share sell orders. I’d get a better price this way in general. Does this sound like a reasonable approach?
Main thing is to watch how close you're cutting with it your available cash (or have a margin account). If you have $100 and you place an order to buy what you think is $100 worth and the price goes up to $100.01, then you'll end up having to sell something to fund the purchase. Again, that only applies to a cash account where you're cutting it close.

Separately, I do have about 50 individual S&P 500 stocks that I need to liquidate. Wealthfront bought them for me earlier this year, but I don’t use Wealthfront anymore. I have 1-3 shares of each stock. Does the same rule apply here? Just use a market order when I sell all of them? (I will in a few months once all gains become long term)

Thanks!
With this scenario, I personally would just use a market order. The main difference between individual stocks and ETFs is that ETFs have the creation/redemption mechanism. I can place an order to buy 20,000 shares of VIOV (double the daily average volume) and I wouldn't move the market because an authorized participant would step up to take care of things. The same wouldn't happen to an individual stock--my trade would move the market in a major way.

Obviously you're talking about a handful of shares in highly liquid stocks. I am actually quite surprised that livesoft did not suggest that this is a good opportunity to try some different ways of executing trades. Try some market orders, some limit orders, place some overnight to execute as the open and tell us what happens. :sharebeer

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livesoft
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Re: Case study Broker trade executions

Post by livesoft » Mon Dec 23, 2019 10:42 pm

Oh, yeah, I forgot to suggest that
stlutz wrote:
Mon Dec 23, 2019 10:37 pm
... this is a good opportunity to try some different ways of executing trades. Try some market orders, some limit orders, place some overnight to execute as the open and tell us what happens. :sharebeer
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ma21n2
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Re: Case study Broker trade executions

Post by ma21n2 » Mon Dec 23, 2019 10:45 pm

Thank you both!

Startled Cat
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Re: Case study Broker trade executions

Post by Startled Cat » Sun Dec 29, 2019 12:35 pm

I may have an interesting data point to add soon. I'm planning to buy about 1100 shares of FLLA (Franklin FTSE Latin America ETF). The average daily volume is 181 shares, and there are only 100,000 shares outstanding.

I haven't had a chance to look at bid/ask prices during trading hours, but I imagine there's a significant spread. Am I better off placing a limit order inside the spread and adjusting it until it executes, or placing a marketable limit order and hoping for price improvement?

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Re: Case study Broker trade executions

Post by lazyday » Sun Dec 29, 2019 4:33 pm

Startled Cat wrote:
Sun Dec 29, 2019 12:35 pm
I may have an interesting data point to add soon. I'm planning to buy about 1100 shares of FLLA (Franklin FTSE Latin America ETF). The average daily volume is 181 shares, and there are only 100,000 shares outstanding.

I haven't had a chance to look at bid/ask prices during trading hours, but I imagine there's a significant spread. Am I better off placing a limit order inside the spread and adjusting it until it executes, or placing a marketable limit order and hoping for price improvement?
I was happy with my purchases of FLKR. I used market orders and marketable limit orders. My average price with market orders was probably a little lower than halfway between the ask and the midpoint between the bid and ask. For example if the spread was 20.00 / 20.10, then I think may average was less than 20.075. Not bad if the ideal average is 20.05.

I tried to estimate fair market value, and it seemed that my price was very close to FMV. It didn’t seem that I was paying a premium, though it’s difficult to make a good estimate.

There were often 1000 shares at bid and ask. You might try a marketable limit order for 100 shares, and if satisfied, another marketable limit order for the rest of the shares. If there are under 1000 shares at ask, you could break it in to more trades.

I don’t suggest using market orders larger than the number of shares at ask, and there’s a Vanguard paper suggesting marketable limit orders instead of market orders. With marketable limit orders, you can set a price slightly higher than the ask and be sure your trade won’t execute at a price higher than that.

I have been unhappy with non-marketable limit orders and generally avoid them. My marketable limit orders haven't seemed to get as much price improvement as my market orders, but I might not have done enough trials to reach statistical significance. For now I am using market orders, but am not suggesting that over Vanguard's advice.

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Re: Case study Broker trade executions

Post by Startled Cat » Sun Dec 29, 2019 5:33 pm

lazyday wrote:
Sun Dec 29, 2019 4:33 pm
I have been unhappy with non-marketable limit orders and generally avoid them. My marketable limit orders haven't seemed to get as much price improvement as my market orders, but I might not have done enough trials to reach statistical significance. For now I am using market orders, but am not suggesting that over Vanguard's advice.
Fascinating. I had always assumed there was no reason to use a pure market order over a marketable limit order (unless it was very important that the order execute, even in case of a sudden market move). I suppose I don't know of any reason why market makers couldn't discriminate against marketable limit orders as you describe, but neither can I think of any incentive to give one type of order more price improvement than the other.

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Re: Case study Broker trade executions

Post by ftobin » Sun Dec 29, 2019 11:51 pm

Startled Cat wrote:
Sun Dec 29, 2019 5:33 pm
but neither can I think of any incentive to give one type of order more price improvement than the other.
Market makers can play shenanigans so that the limit order is less likely to execute, and become posted, therefore earning them a rebate instead of having to pay PI.

Startled Cat
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Re: Case study Broker trade executions

Post by Startled Cat » Mon Dec 30, 2019 11:50 am

Here are some results from trades I placed this morning. All trades were at Merrill Edge.

I like to get some of my EM exposure through single country/region ETFs rather holding everything at market cap weight, which skews very heavily towards China/Taiwan. Today I was trading from ERUS into FLRU and ILF into FLLA to take advantage of much lower expense ratios, and also adding to the ILF/FLLA position.

The first order of business was to sell ERUS. This turned out to have more of a spread than I expected. I didn’t record the exact bid/ask prices, but I believe they were about $42.77 and $42.82. I put in a limit order to sell 360sh at $42.81, and interestingly, 2 shares executed immediately at that price. I then changed the limit to $42.75, and 300 shares executed at $42.77 in separate batches of 100 shares each, and 58 executed at $42.75. Not a great result.

I then put in a buy order for FLRU, which was trading at $29.51 x 10 / $29.55 x 10. I decided to start with 100 shares. I submitted a limit order for 100 shares at $29.55. It executed at $29.543.

Unfortunately, in my morning delerium, I ended up placing this order in the wrong account, so I had to unwind that trade. I put in a sell order at $29.54, hoping I could execute against it when I bought again from the correct account. The ask immediately changed to $29.53, then further to $29.52. When I put in my next buy order for 100sh @ $29.54, it executed at $29.52. I lowered my ask price on the incorrectly purchased shares to $29.52 and submitted another buy order, this time for 300 shares at $29.52. This time it executed at $29.518 - I got some price improvement, but my shares in the wrong account were still unsold.

By this point, the bid/ask was $29.50 x 10 / $29.52 x 1 (the ask may have been my sell order). I lowered my ask again to $29.51, and the sell order executed before I had a chance to put in another buy order.

I finished buying the remaining shares of FLRU. I put in an order for 100sh at $29.55, with the bid at $29.52 and the ask at $29.56. It didn’t execute immediately, so I raised the limit price to $29.57, and it executed at that price (presumably the market moved). I put in the last buy order for 21 shares at $29.57, and it executed at $29.569.

Next, I sold 356 shares of VWO using a limit order with the limit price 1 cent below the bid. It executed right at the midpoint between the bid and the ask. Nice.

Then I sold 526 shares of ILF. The spread was just 1 cent. A marketable limit order executed right at the bid price, with no price improvement.

Now I was ready to buy FLLA, the most thinly traded of all these securities. Ony 275 shares had traded so far during the day. I decided to try a large order to see what would happen. The bid was 28.53 x 10 and the ask was 28.56 x 10. I put in a limit order to buy 1000 shares at $28.56. The status of the order showed up as “pending review”, which was not something I had ever seen before. Apparently this order got flagged for some reason. I cancelled it and replaced it with a 100 share order at $28.54 (the bid/ask were now $28.51 and $28.54). It executed at $28.539. I followed this up with a 500 share order at the same limit price, and it executed at $28.538. For my last order, I did an odd lot of 483 shares, again at the same limit price, and it executed at $28.537. I was impressed that these orders executed immediately and got price improvement.

I made a few more trades of other, more liquid, securities, but they don’t seem particularly interesting. Of the four other trades, two got price improvement and two did not. All four were marketable limit orders.

ma21n2
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Re: Case study Broker trade executions

Post by ma21n2 » Mon Dec 30, 2019 10:11 pm

I bought some VNQI (Vanguard Global ex-U.S. Real Estate ETF) today from my Vanguard Roth IRA account. ETF.com says average spread is 0.03%. I made 3 market buy orders (10 shares, 100 shares, and 100 shares). When I placed these orders, the spread was $0.01.

To my surprise, all 3 buy orders executed right in the middle between the bid/ask prices. I got $58.835 on the first two market buy orders (10 shares and 100 shares) in the morning. And then I got $58.755 on the 100 share purchase I made in the afternoon.

Not sure if this has anything to do with the fact that I'm purchasing Vanguard ETFs from a Vanguard account. I use Merrill Edge for taxable brokerage (usually market buy order) and I rarely ever get a price right in between bid/ask when the spread is $0.01.

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