Trading Odd Lot Shares

T

TOM134

I have a question for my friendly traders out there:

Do you know of any on-line day trading retail brokers that will accept odd-lot trades below 100 shares?

My understanding is that most will only accept minimum trades of at least 100 shares.

I sometimes like to divide my small bankroll among a few stocks and this more often than not will result in some shares being less than 100.

Does IB accept odd-lot shares?

Any help out there ?

Tom
 
IB does support odd lots just fine. Depending on the liquidity of the issue, fills range anywhere from fast and decent to not so fast and just "OK."

I recall seeing somewhere that venues which charge an extra fee for odd lots will be excluded -- I think this is just Arca.

NYSE or Amex explicit routing is also not permitted as I recall, but may be used by SMART routing if no other destinations can be found to send the order. I've had corporate spin-off distributions of as little as 3 shares closed out on NYSE at IB.

Your opportunity for price improvement is greatly diminished though. The same is true if even with round lots if the size is below order book minimum sizes (e.g., OTC BB shares priced $1-$10 are quoted at 500 share minimums on NASDAQ, so market makers will have to take the other side, and not just be a pass through for smaller sized orders).
 
Tom, let's say the bid-ask on a stock is

Bid: 11 Ask: 12

On an odd lot the spread might be:

Bid: 10 Ask: 13

since there's less liquidity w/ odd lots.

Of course, in reality the difference would be a cent or 2, but it's still a big difference if you're daytrading.
 
Just one more comment on odd lots:

Note that various exchange rules (NYSE, AMEX, ArcaEx) prohibit certain activities involving odd lots including:

- simultaneously having both limit buy & sell orders in the same security
- a series of odd lot transactions in the same security that could have been bundled into round or partial round lots

A typical reference is NYSE Information Memo 04-14.

http://apps.nyse.com/commdata/PubIn...emosNyseCom/85256A71006FB86385256E5F004FFFD0/$FILE/Microsoft%20Word%20-%20Document%20in%2004-14.pdf

I do not know the level of IB's surveillance in this area, though I'm sure if NYSE calls, IB will get straight on it :) .
 
I have found limit order fills to be quite good on IB with thinly traded stocks. I have had odd lot buy orders trigger below the official low for the day even. I suspect they combine orders to make trades sometimes. For example, if I have a limit buy order for 50 @ $20.50 and there is limit sell order sitting there for 100 @ $20.51, then a market buy order comes along for 50 shares then they combine the two buy orders with the market order triggering at $20.52 to make the sell order at the average price of $20.51. That also explains why market orders are not as good.
 
Thanks for the responses so far everyone !

1) So, am I correct to assume that:
if in a non volatile market, and
if both sides of the quote are very liquid,
the chance of buying at the ASK or selling at the BID would be fairly easy for the odd-lot trade of less than 100 shares to be executed?

Notice, Im not referring to 'fractional' share orders.

2) Does anyone know of other on-line day trading Brokers which accept odd-lot trades of less than 100 shares?

Much appreciated.

Tom
 
It depends on the stocks. In some stocks odd-lots take 5-10 seconds longer to fill and as much as 5-10 cents slippage compared to round lots.


Quote from TOM134:

Thanks for the responses so far everyone !

1) So, am I correct to assume that:
if in a non volatile market, and
if both sides of the quote are very liquid,
the chance of buying at the ASK or selling at the BID would be fairly easy for the odd-lot trade of less than 100 shares to be executed?

Notice, Im not referring to 'fractional' share orders.

2) Does anyone know of other on-line day trading Brokers which accept odd-lot trades of less than 100 shares?

Much appreciated.

Tom
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