Limit orders execution at Fidelity vs Schwab

[urban]

I had TFLO etf at both my Schwab brokerage account and Fidelity IRA that I was selling today at both brokerages. The ask/bid was 50.54/50.55, and I wanted to compare how Fidelity and Schwab would handle it.

So at 9:44 this morning at Fidelity I placed a limit order to sell 123.** shares at 50.55. A few minutes later at Schwab I placed a limit order to sell 16.** shares at the same price 50.55. No any additional conditions for both limit orders were set (like All or None, etc.)

Schwab order was filled at 10:17, and Fidelity order was just sitting open. At about 1:30 PM I called Fidelity and asked how it could be that the Fidelity limit order was placed earlier and was still not executed, and the same limit order from Schwab was placed later and already filled.

The rep put me on the hold, and then provided the explanation: the available matching orders from exchanges were distributed to different brokerages, so that each brokerage got its own sub-queue (so to speak), and that is how a limit order placed later by one brokerage would be filled, and the same limit order placed earlier by another brokerage would still not be executed.

I was very skeptical about this explanation, so later I called Fidelity again. The second rep just stated that he cannot explain why earlier placed Fidelity limited order was not filled, and the same Schwab limited order placed later was filled.

Later in the day I just canceled my Fidelity limited order, and sold shares at market. The fill was 50.545, that is in the middle between bid and ask.

Is anybody could explain how this discrepancy with filling similar limit orders from different brokerages could happened? Thank you.

[NYGiantsFan]

Having worked on OMS (both equity & fixed income), fidelity is correct.
For Schwab, there is possibility that they were able to match buy/sell order inhouse. In-house match may have higher priority than possibly exchange traded.
Fidelity order may have gone to exchange (depends on which exchange) and exchange wasn't able to find matching.

[toddthebod]

Brokers have a choice of market makers and regional exchanges where they can send orders. There is not one big market where all trades are executed first come first served.

There's also the possibility they were able to match the smaller quantity but not the larger. Did you have "all or none" selected on your Fidelity order?

[typical.investor]

Is anybody could explain how this discrepancy with filling similar limit orders from different brokerages could happened? Thank you.

Schwab and Fidelity don't route to the same exchanges.

Schwab does accept some payment for order flow to various exchanges. Fidelity does not.

Fidelity claims they provided price improvement of $816 million on trades in 2023 (compared to the National Best Bid and Offer). In the 4th Quarter of 2024, Schwab claims clients received $410 million from price improvement.

Fidelity says 95.47% of clients receive price improvement. Schwab says 97.5% of theirs do.

In any case, I think your odd lot of 16.** shares was routed at Schwab to an exchange that could execute the transaction while the order at Fidelity was not.

Order routing at Schwab: https://www.schwab.com/legal/order-routing-1
https://www.schwab.com/execution-quality

Order routing at Fidelity: https://www.fidelity.com/trading/execut ... y/overview

[Jack FFR1846]

Having worked on OMS (both equity & fixed income), fidelity is correct.
For Schwab, there is possibility that they were able to match buy/sell order inhouse. In-house match may have higher priority than possibly exchange traded.
Fidelity order may have gone to exchange (depends on which exchange) and exchange wasn't able to find matching.

In addition, it's easier to sell 16 shares than 123. Try selling 100k shares and see how long that takes. It also depends what the market is doing. If it's not rising, you might not sell anything.

[urban]

Brokers have a choice of market makers and regional exchanges where they can send orders. There is not one big market where all trades are executed first come first served.

There's also the possibility they were able to match the smaller quantity but not the larger. Did you have "all or none" selected on your Fidelity order?

No any additional conditions for both limit orders were set (like "All or None", etc.)

[urban]

Having worked on OMS (both equity & fixed income), fidelity is correct.
For Schwab, there is possibility that they were able to match buy/sell order inhouse. In-house match may have higher priority than possibly exchange traded.
Fidelity order may have gone to exchange (depends on which exchange) and exchange wasn't able to find matching.

In addition, it's easier to sell 16 shares than 123. Try selling 100k shares and see how long that takes. It also depends what the market is doing. If it's not rising, you might not sell anything.

No "all or none" conditions were set, so with a large order from Fidelity (compare to Schwab's) I would expect at least a partial fill.

[livesoft]

Dark pools. There is an entire book on the subject worth reading if you like to trade even occasionally:
https://www.amazon.com/Dark-Pools-Machi ... 0307887189

Maybe add your experience to the Case Study Trade Executions thread:
viewtopic.php?t=165732
Thanks!

[urban]

Maybe add your experience to the Case Study Trade Executions thread:
viewtopic.php?t=165732

Done.

[urban]

Thank you for all replies.
I called Schwab asking where my limit order to sell 16.** shares of TFLO was executed. The rep said that it was executed "over the counter". I asked for more details. After a few minutes on hold, I was notified that Schwab sent my order to a market maker. That market maker did not send my order to an exchange, but filled it itself, in-house.

[sycamore]

Thank you for all replies.
I called Schwab asking where my limit order to sell 16.** shares of TFLO was executed. The rep said that it was executed "over the counter". I asked for more details. After a few minutes on hold, I was notified that Schwab sent my order to a market maker. That market maker did not send my order to an exchange, but filled it itself, in-house.

Your transaction confirmation likely has a little footnote indicating what happened:

"D1 As principal for our account, we have sold to you or purchased from you."
or
"A1 Schwab acted as your agent."

[senex]

Brokers have a choice of market makers and regional exchanges where they can send orders. There is not one big market where all trades are executed first come first served.

OP, the above answer is the key to your situation.

Your order was not marketable, so neither broker had an obligation to fill you (but may fill you if it wishes -- which Schwab wished to do). If not filled, the brokers (in this case) have an obligation to display your order on one of the 15 US stock exchanges (whichever exchange the broker wishes; probably different for Fid vs Schwab).

Once it is displayed, your broker cannot control who else in the world might want to trade against your order. TFLO typically has hundreds of thousands of shares displayed across the 15 exchanges, plus presumably more shares available on dark pool and other non-exchange venues. Anyone wanting to buy at 50.55 may send the buy order to any of those places. If the buyer doesn't send to the exchange where you're displayed, or if he does and your order is not first in line (among all orders on that exchange), then you won't get the fill.

In short, when your 100ish shares is among a million shares offered for sale at 50.55, it is pretty normal to not get filled. The fact that Schwab's market maker wanted to fill you at the best ask is somewhat surprising -- but it does happen from time to time.

Best wishes.

[urban]

Thank you for all replies.
I called Schwab asking where my limit order to sell 16.** shares of TFLO was executed. The rep said that it was executed "over the counter". I asked for more details. After a few minutes on hold, I was notified that Schwab sent my order to a market maker. That market maker did not send my order to an exchange, but filled it itself, in-house.

Your transaction confirmation likely has a little footnote indicating what happened:

"D1 As principal for our account, we have sold to you or purchased from you."
or
"A1 Schwab acted as your agent."

For this transaction there is a following footnote:

"G1 The unit price shown is an average price. Details regarding actual prices on the individual transactions are
available upon request. Schwab acted as your agent."

[typical.investor]

Thank you for all replies.
I called Schwab asking where my limit order to sell 16.** shares of TFLO was executed. The rep said that it was executed "over the counter". I asked for more details. After a few minutes on hold, I was notified that Schwab sent my order to a market maker. That market maker did not send my order to an exchange, but filled it itself, in-house.

Yes, and it was quite possible that Schwab directed it to that market maker and Fidelity didn’t because that market maker pays Schwab to do so.

The benefit of PFOF is liquidity which you seem to have gotten. Schwab is still obligated to get you the best price they can (which they do by evaluating the market makers) and it should be better than the NBBO price.

Still, it is contentious as there seems to be a potential conflict of interest there, and for options and less liquid stocks, the execution is often not as favorable.

[Fat Tails]

Dark pools. There is an entire book on the subject worth reading if you like to trade even occasionally:
https://www.amazon.com/Dark-Pools-Machi ... 0307887189

Maybe add your experience to the Case Study Trade Executions thread:
viewtopic.php?t=165732
Thanks!

Thanks for the recommendation Livesoft!