Personal Finance & Money Asked by Maciek Semik on April 3, 2021
Imagine a stock with a high spread with only 1 buyer and 1 seller. If the stock is $1, and the seller ask is $1.10, and I am the buyer. And assume I do not know the book for the stock.
If put in a limit buy order for $1.20 to fill my order quickly. Will I pay $1.10 or will I pay $1.20? Or something in the middle. Is this depending on the broker? Will my broker fill it at $1.10 first and try to fill any other asks below $1.20 in order?
I’ve also noticed that you can apply algos to your order. What is the algo called which will execute orders from lowest ask to highest in order. Or is this not an algo but just the way brokers do it anyways.
Thanks.
In the U.S., NBBO requires that brokers execute customer orders at the best available bid and ask prices.
If the bid is $1.00 and the ask is $1.10 and you place a limit order to buy at $1.20, your fill will depend on the size of your order and the size available below $1.20.
If you are attempting to buy fewer shares than offered at $1.10, you get a complete fill at $1.10
If you are attempting to buy more shares than offered at $1.10, you get those $1.10 shares and if no new sell orders come in at $1,10, you will get more shares at a higher price if they are available below $1.20. If not, you get some shares but you end up with a partial fill.
Size matters.
Correct answer by Bob Baerker on April 3, 2021
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